Pension Changes

The new state pension – which will be introduced no earlier than April 2017 – will be equal to £144 a week in today’s money. All state pension rights accrued under the old system will be recognised, so people will not lose any pension they have earned.


Individuals will have to make 35 years worth of National Insurance contributions in order to receive the full amount and will have to accrue a minimum number of qualifying years – probably between seven and 10 – to be eligible for any state pension at all. The Department for Work & Pensions calculates, by the 2040s, more than four-fifths of people achieving state pensionable age will receive the full flat-rate pension payment.

The National Association of Pension Funds (NAPF) has welcomed the announcement, describing the new system as “a much-needed shake-up that will ultimately help millions of pensioners and savers”, adding: “A flat-rate system dovetails with the recent auto-enrolment reforms by helping workers see what they need to save in their new workplace pension.” However, the NAPF also warned the transition needed to be managed “carefully”.

The government believes at least half of all people reaching state pension age before 2050 are likely to be better off under the new system. In particular, self-employed people and women who have left the workplace to bring up children are likely to benefit. On average, 750,000 women who reach state pensionable age in the decade after the introduction of the new system are expected to receive an additional £9 a week in today’s money.

Nevertheless, many people will not benefit from the new system, including those who reach state-pensionable age before April 2017 and, while it does improve the ‘safety net’ for British pensioners, it should really only be seen as part of an overall retirement plan.