A new flat rate state pension of £144 per week as part of government reforms has been revealed as part of the Queens speech. The Pensions Bill will come in to effect in 2016 and would create a ‘simpler state pension system that encourages saving, and provides more help for those who have spent years caring for children’ the Queen said.
The rate is worth £144 in today’s money and expected to be worth £155 by 2016. To get the new single rate pension will that will replace the current two tiered pension system people with have to contribute up to 35 years’ worth of National Insurance.
The bill also features a change to the age that UK residents can get a state pension, which will rise from 65 to 67 years old between 2026 and 2028. Married couples will no longer be able to claim a married person’s allowance worth £66 per week based on their spouses National Insurance contributions, but the time when people who are unable to work when looking after children or sick relatives will count towards them.
Chris Noon who is a partner at Hymans Robertson welcomes a simpler state pension system but believes that the ‘vast majority’ of workers will end up losing out from the new system. Stating that: ‘The reform has been positioned as a benefit, but in reality it reduces pensions for the vast majority of current employees, including those on minimum wage and part-time workers.’
‘The savings are then used to increase the state pensions of the self-employed and, rightly, the very, very low paid.’
‘A private sector employee earning minimum wage could be worse-off by up to £48-a-week in state pension when they come to retire.’