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Gov't to introduce £144-a-week flat-rate state pension from 2017

Gov't to introduce £144-a-week flat-rate state pension from 2017

The government will today outline detailed plans for the implementation of a flat-rate state pension, including measures requiring a longer record of national insurance contributions (NICs), and a softening of the blow for higher earners.

The Department for Work and Pensions will publish its long-awaited white paper on state pension reform this afternoon, committing to introduce a pension worth £144 a week in today’s prices from April 2017, according to reports. It will hike the number of years of NICs required to qualify for the full state pension from 30 to 35, and introduce a minimum of 10 years of NICs to qualify for any state pension.

According to the Financial Times, the paper will also include a measure to protect those affected by the abolition of contracting out that will accompany the reforms. The introduction of a flat-rate state pension will remove the need for the state second pension (S2P). Around six million workers have contracted out from the S2P, and received a national insurance rebate.

With the abolition of contracting out and the rebates, these six million would face an effective tax rise of up to 1.4%. But according to the FT, the government will outline a mechanism which will allow them to recoup that sum through annual credits for the remainder of their working lives.

The white paper will also outline a link between the state pension age and rising life expectancy. According to the FT, the paper will recommend the age be reviewed at least once during the life of each parliament and a minimum of 10 years’ notice be given for any change.

The flat-rate pension will be paid only to new pensioners reaching the state pension age by April 2017. Entitlements accrued under the current system before then will be honoured.

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