The government have announced proposals for a new single tier pension.
The single tier reforms will restructure the State Pension into a simple flat rate amount from 2017 at the earliest. Those over State Pension age when the reforms are implemented will continue to receive it in line with existing rules.
The single tier pension will:
- be set above the basic level of means tested support. The amount will be set nearer implementation;
- replace the State Second Pension, contracting out and out-dated 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 single tier pension;
- require 35 qualifying years of NIC or credits for the full amount, with pro-rating where 35 years is not achieved. There will also be a minimum qualifying period of between seven and ten qualifying years;
- be based on individual qualification, without the facility to inherit or derive rights to the State Pension from a spouse or civil partner; and
- 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.
The government will also carry out a review of the State Pension age every five years, based around the principle that people should maintain a specific proportion of adult life receiving the State Pension. The first review will take place in the next Parliament.