Single Tier State Pension
The recent single-tier state pension, also known as a ‘flat-rate’ pension, moved into effect at the beginning April this year. As it will make the system simpler, and increase the starting figure to £155pw, the recent system isn’t set to benefit everyone though. To see whether you will be better or worse off not affected by adjustments at all read on.
The new system relates for men with birthdays following 6th Apr 51 for men, and 6th Apr 53 for women, so when you retired before 6th Apr 16, the new system won’t affect you and you’ll continue on the previous one.
Unlike the previous system, not all people in the UK are going to be entitled to a state pension; you need to have made National Insurance contributions (NICs) for at least 10 years. These don’t need to be in consecutive years, people will be exempt from the rule including some parents, carers and jobseekers. Yet, it’s suggested that approximately 70,000 individuals will not qualify at all.
To obtain the full pension, you’ll need 35 years of NICs, up from 30 years.
Two million individuals are unlikely to obtain the whole amount because of being contracted out of the second state pension previously. Many of these are likely be public sector employees. Likewise, all those who have paid towards the second state pension will have additional service which will help take them above the minimum pension limit.
It’s believed that two in three people currently in their 30s will theoretically be £17k worse off throughout their retirement. That rises to approximately 75% for the 20-somethings and £19 worse off. There will of course be those that will benefit from the new system – around 6 million if your to believe the government stats.
In general, and assuming a pension age of 70 by the year 2050, if you were born before 1980 you will probably expect benefit from the flat-rate pension; in contrast, those born after 1980 will not.