UK Pension Reform
Changes To The UK State Pension
Apart from the changes
to the UK state pension age, there are going to be several
important changes to the state pension itself. These changes
will apply to men born from 6th April, 1945 and women born
from 6th April, 1950:
Link To Earnings
In the past, the state pension was linked
to earnings - meaning that it went up in line with increases
in average earnings. Some years ago, this was changed so
that the state pension was linked to inflation, instead.
The problem with this is that average earnings
generally rise a little faster than inflation - meaning
that increases to the state pension have been lagging behind
increases to average earnings, making life harder for those
people who depend on the state pension.
This is now going to be changed so that the
state pension is once again linked to earnings. The government
have said that they will probably do it in April 2012, but
that this will be subject to "affordability" -
which could mean that it is delayed or even doesn't happen
National Insurance Contributions
At present, most people need about 39 years
contributions to qualify for a full state pension. This
has often been difficult to achieve, especially for women,
who may have taken several years out to bring up children.
From April 6th, 2010, these rules are changing.
Both men and women will only need 30 years
of NI contributions to qualify for a full state pension.
However, you will have to continue paying NI until you reach
the state pension age.
The rules surrounding NI contributions are
also being changed so that mothers who stay at home to care
for young children (up to 12 years old) and people who are
full-time carers for disabled people will get full NI credits
for the years they spend doing this - meaning that being
a carer or mother should not make it any more difficult
for you to qualify for a full state pension.
Pension Credits are the government's system
for topping up state pension payments. At present, the Pension
Credit system has two parts:
- this is for people who have less than £6,000 in
savings and depend on the state pension. It guarantees a
certain minimum income per week
- this is for people who have another income as well as
the state pension. It provides a small top-up amount each
The guarantee credit presently rises with
earnings and the government have said that they are not
going to change this.
At the moment, both men and women qualify
for the guarantee credit from age 60. This age is going
to be increased to 65 in the same way as the women's state
The savings credit currently
increases faster than earnings, for some complicated reason.
This seems to unreasonably favour people who already have
better pensions, and is going to be scrapped.
From 6th April, 2008, savings credit payments
will rise in line with earnings.
From 6th April, 2015, savings credit payments
will rise in line with inflation - which will mean they
rise more slowly.
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