23 January 2013

Facts and Opinions - Flat Rate State Pension

Here's some facts about the Government's recent proposal:
  • £144 per week (£7,488 per year), but increased with inflation by the time it starts
  • Will increase each year by the higher of earnings, prices, or 2.5%
  • It won't apply to anyone whose State Pension Age comes earlier than 2017 (and perhaps later than that)
  • Requires 35 years of National Insurance contributions for the full amount (currently 30 years)
  • At least 10 years contributions before any State Pension is given
  • State Pension Age will increase with life expectancy
  • Couples will qualify (or not) as individuals - no more married couples rate
  • The State Second Pension (was SERPS) will be closed and contracting out will be abolished (already abolished for Defined Contribution pensions)
  • Previously contracted out employees will have to pay 1.4% more National Insurance contributions on relevant earnings - including most public sectors employees
  • The baseline State Pension will be adjusted to take account of periods of being contracted out (details not known yet)
  • It will avoid mass means-testing - no more Pensions Credit which put some people off saving, while others didn't claim and should have
  • The Minimum Income Guarantee will remain (£142.70 per week currently)
  • There will be no more inheritance of pension entitlement for widows and divorcees
  • The self-employed will be better off since they cannot currently gain entitlement to more than the Basic State Pension

And here's some opinions (mine):
  • The State Pension is worth having - you would need around £150,000 in your own pension plan to get the equivalent income
  • This is a good simplification of a complex system
  • In spite of what the politicians say this is not the end of tinkering with the pensions system - similar claims were made in 1998, 2002, and 2006

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