The single-tier state pension

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In April 2013, the Government published plans to reform the current state pension into a simple Single-Tier Pension (STP), which subject to the agreement of Parliament, will be in place for people retiring after the 6th April 2016. If you reach state pension age before that date you will receive your state pension in line with existing rules.

It is proposed that if you contribute entirely to the new single-tier scheme, it will replace today's complicated state pension with a single amount based on 35 qualifying years of National Insurance contributions. If you have fewer than 35 years when you reach State Pension age you will get a pro-rata amount, provided that you have a minimum number of between 7 and 10 qualifying years when you reach state pension age.

If you have made National Insurance contributions or received credits under the current system, they will be converted into a single-tier foundation amount. Providing you meet the minimum qualifying year requirement, you will get no less than the amount calculated using the present scheme rules.

According to the Department of Work and Pensions (DWP), the single-tier pension will deliver a modern state pension based on individual qualification. However within the proposed STP arrangements, you will not be able to inherit or derive rights to the single-tier pension of your spouse or civil partner. Although, if you have contributions or credits on your National Insurance record under the current state pension scheme, there will be transitional protection.

The outcome is that all women born on or after 6 April 1953 will reach state pension age after the introduction of single tier and will receive a single-tier pension, as will every man born on or after 6 April 1951. As long as they meet the minimum qualifying period, all of these people will be able to get a single-tier pension.

The amount you will receive will not be decided until shortly before the STP is introduced. It will be set above the basic level of means-tested support - the Pension Credit standard minimum guarantee which was £142.70 per week in 2012/13. A figure of £144 per week is given as the example in the government's proposals.

It is also proposed that the single-tier pension will be increased each year, by at least the percentage that average national earnings have grown in the previous year.

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