TaxAgility Accountants London_PensionThe government has proposed the introduction of a simple, single-tier flat rate state pension in the hope of removing complex elements out of the current State Pension system and encouraging a greater number of people to save for retirement.

According to The Department for Work and Pensions, in the new system – which incorporates a merger of the basic state pension with the state second pension – the single-tier pension is expected to be worth approximately £145.40 per week for a single pensioner, compared to the current state pension of £110.00 per week (alongside means-tested top-ups).

The Pensions Bill, which contains the provisions to bring forward the flat rate state pension as part of the State Pension system, was introduced to the House of Commons in May of this year, and is currently going through parliament.

Who It’ll Affect

The new flat-rate pension will only affect women born on or after 6 April 1953, and men born on or after 6 April 1951, provided they meet the minimum qualifying period of 35 years of National Insurance contributions.

If you have under 35 years worth of qualifying National Insurance contributions by the time you reach state pension age, you’ll receive a pro-rata amount of the new single-tier pension, so long as you have a minimum number of years worth of National Insurance contributions, a number which is most likely to be set between seven and ten years.

If You’re Already Receiving a State Pension

If you’re already receiving a state pension, or you’ll reach state pension age before 6 April 2016, despite popular belief you will not be impacted by these changes. Your payments will continue as normal under the current State Pension system.

The End of Derived Entitlement

In the current State Pension system, if you are married or widowed you may receive a certain pension amount per week based on the national insurance contributions made by your spouse or civil partner. However, the new flat rate state pension will be based entirely upon your individual qualifications, without the ability for you to derive entitlement to the State Pension from the National Insurance record of any other individual.

The Reason for The Introduction of The Flat Rate State Pension

The main reasons for these proposed changes come down to three key points;

  1. An increase in individuals undersaving for retirement, with the government estimating that almost eleven million people in the current workforce face inadequate retirement incomes.
  2. The vast complexity of the current State Pension system.
  3. Inequalities in the current State Pension system that affect certain groups, particularly individuals with broken work history and the self-employed – both groups of which women make up a large number.

Recognising that the needs of many individuals may struggle to be met once they reach retirement age, The Department for Work and Pensions is also trying to change the way people save through workplace pensions, by “…raising standards and clarifying outcomes so people can save more with confidence”.


Whether you plan on supplementing your state pension with a workplace pension or your own private pension scheme, contact us today on 020 8780 2349 for expert advice on the pension scheme that is right for you. We can recommend suitable independent advisors; provide introductions and work together with them to make sure you receive the best products and advice.

This blog is a general summary. It should not replace professional advice tailored to your specific circumstances.