The new single-tier pension will be introduced in April 2017 at the earliest. This reform will affect people who reach State Pension age from the time it is introduced. Current pensioners and those reaching State Pension age prior to introduction of the single-tier pension will not be affected and will continue to receive their State Pension in line with existing rules.
On 4 April 2011, the UK Government launched a public consultation on two options for state pension reform:
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Option one, ‘faster flat rating’ would accelerate changes already underway to deliver a flat-rate two-tier pension.
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Option two, ‘single tier’ represented a bolder reform to introduce a flat-rate pension set above the basic level of means-tested support.
Around three-quarters of the organisations who responded to the consultation preferred the concept of a single-tier pension. The UK Government has since built on the Green Paper single-tier model to develop a detailed proposition for state pension reform. Special attention has been given to the design of the transition to the new system, to ensure that the simplicity and clarity of the single-tier pension are achieved as quickly as possible after implementation. Legislation to reform the state pension will be introduced at the earliest opportunity, subject to the Parliamentary timetable. The Government intends to implement the single-tier pension in April 2017 at the earliest.
The single-tier reforms will restructure current expenditure on the state pension into a simple flat-rate amount, to provide clarity and confidence to better support saving for retirement. Those already over State Pension age when the reforms are implemented will continue to receive their state pension (and the Savings Credit, where applicable) in line with existing rules.
The single-tier pension will:
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be set above the basic level of means-tested support (the Pension Credit Standard Minimum Guarantee, currently £142.70 per week for a single pensioner). The current legislative requirement to increase the basic State Pension at least in line with average growth in earnings will also apply to the single-tier pension. For illustrative purposes, this document assumes uprating of the single-tier pension by the triple lock, in line with coalition policy for uprating the basic State Pension;
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replace the State Second Pension, contracting out and outdated additions, such as the Category D pension and the Age Addition. The Savings Credit element of Pension Credit will also close to pensioners reaching State Pension age after the implementation of the singletier pension;
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require 35 qualifying years of National Insurance contributions (NICs) or credits for the full amount. There will also be a minimum qualifying period of between seven and 10 qualifying years (modelled as 10 throughout this document). Those with fewer than 35 qualifying years but above the minimum qualifying period will receive a proportionally smaller single-tier amount;
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be based on individual qualification, without the facility to inherit or derive rights to the state pension from a spouse or civil partner; and
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continue to allow people to defer claiming their state pension and receive a higher weekly state pension in return. The deferral rate will be finalised closer to the planned implementation date. It will no longer be possible to receive deferred state pension as a lump-sum payment.
Press release
Full paper
See also Steve Webb's Statement on state pension reform (+ link to Parliament TV)
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