A new flat rate universal pension was announced by the Government on the 14th January, to take effect from April 2017.
Under the new simplified system, the rate will be universal and, therefore, everyone will receive the same state pension of £144 per week; provided they have reached the state retirement age, and have made 35 years’ worth of National Insurance (NI) payments. However, those who retire before April 2017 will stay on the current system, which provides £107 per week, but through various top up means can be up to £142.70 per week.
So who will win and lose under this new system? The self-employed as well as mothers and careers who generally don’t pay as much National Insurance at present will receive a much larger state pension. By comparison those who are employed and pay National Insurance will not receive the NI pension top ups currently available, and those who have paid less than 7-10 years of National Insurance will not receive any pension at all.
The new system has been praised as it now means many people are aware of exactly how much state pension they will receive (equivalent to £7,488 per year); and can now save accordingly to maintain their current lifestyle. This may mean that those entering retirement in the future will have more funds when applying for an over 70s mortgage due to their increased savings.