From the 6th April, a new and “simplified” single tier state pension, will replace the former basic and additional state pensions.
In guidance about the changes to state pensions, the Government has claimed that the new state pension is designed to be “a clearer, single payment for the future,” which will “remain contributory in nature” but will sweep away “many of the complexities which have built up over the decades.”
For the next year, the new state pension will be £155.65, however, it is estimated that only half of qualifying pensioners will receive the full amount. Only those who have contributed 35 years of National Insurance will be eligible for a new full state pension. Those who have not reached the necessary 35 years will be entitled to a “proportionate” amount, but there is no pension for people who have under 10 years of contributions.
Additionally, people who were already in receipt of a state pension before 6th April 2016 will not be affected by the new changes.
It is believed that this is an instrumental part of the Government’s attempt to limit the cost of pension changes, at the number of people eligible to receive a pension is due to increase by 410,000 in 2016/17 to 820,000 by 2029.
Changes to the state pension have come into effect just days before the older people’s charity, Independent Age, revealed a survey which found that “money worries” are the primary concern for people who are 65 or older in London.
Almost a third (32%) of 65+ year olds in London said that their “biggest financial worry” was that “their savings will run out.” With over 35% of older people claiming to have actually run out of money before the end of the month.
Furthermore, excluding mortgage debt, 1 in 6 of older Londoners are currently in debt in the region of £700 or more.
The move to the new system will provide a boost to the State Pension for many women, with over 3 million women receiving an average of £11 more per week by 2030 as a result of the changes – helping to address the gender inequalities that have persisted under the old scheme.
Minister for Pensions, Baroness Altmann said “huge efforts have been put into reforming the mind-blowingly complicated State Pension system that exists today into something that, over time, will be clearer for everybody.”
“Millions stand to gain from the changes to the new State Pension,” Altman explained, “including women and the self-employed, who so often lost out in the past.”