What's happening to your state pension?
There will be changes to the state pension and second state pension from April 2016. This means that from April 2016, members will pay more national insurance, as the present rebate of 1.4% will cease.
From April 2016, members will pay more national insurance, as the present rebate of 1.4% will cease.
For anyone drawing his or her full state pension there will be a new flat rate state pension, which will be the equivalent of £144 per week in today's money.
You can find more detail in UCU circular UCU518. See also: Technical note: 'foundation amount' and single state pension, Jan 16 [394kb]
UCU continues to campaign for a better state pension than the new single state pension of April 2016.
Why the new single state pension is not fit for purpose.
There is a lot of confusion amongst members as to the benefits from the new state pension scheme, due to operate from 6 April 2016. UCU believes this is in part due to cynical and repeated attempts by government to imply that the new scheme constitutes a generous increase in state pension payments. UCU believes the new scheme to be no more than an attempt to reorganise the current and clearly inadequate state pension scheme and does not address major issues.
It notes that the new single state pensions payment of £155 per week (2016):
- will only be immediately paid to a small minority of pensioners and an even smaller minority of women
- will not apply in full or even in large amount to 'contracted out' members of schemes like Teachers' Pensions, USS and LGPS
- will not constitute an actual increase from £115.95 to £155 per week even for most of those who qualify for it, as it will replace pension credit and some entitlement to 'SERPS' or 'second pension' already receivable under the current scheme
- will increase the qualifying years of National Insurance payments from 30 to 35 years
- will require 10 years of earnings or credits before any pension is paid out
- will increase NI payments by people currently 'contracted out'; they will pay 1.4% extra and employers 3.4% more
- will not become a simplified universal rate for at least 35 years; when it will be less than the present scheme
- may result in loss of housing benefit
- may result in loss of 'inherited' (between partners) pension rights
- does not provide a pension which reaches the poverty level of £175 per week.
For all the above reasons UCU will continue to campaign for a proper and adequate state pension scheme and to expose the fundamental flaws in the new scheme.
Boosting your state pension
Do you have 35 years of contributions or credits in the state pension scheme?
April 2016, will see the new single state pension scheme come into existence and if you have not reached state pension age you will move into it. This means that you will need to have 35 years of national insurance contributions and/or credits to receive a full state pension.
If you have drawn your occupational pension but not yet reached state pension age you are able to purchase voluntary contributions to increase the years of contributions. For further details see www.gov.uk/state-pension-topup
You are able to purchase additional service years by paying £13.55 per week or £705 per year.
- You are able to do this if you are unemployed and not claiming.
- You are a married women who cancelled your reduced rate election.
- Have reached state pension age (limited to a maximum of the last 6 years).
If you match the following you were eligible to purchase additional state pension from October 2015 for the following 18 months, if:
- you are a man born before 6th April 1951
- you are a woman born before 6th April 1953.
If you have an entitlement to a UK state pension and have reached state pension age before 6 April 2016.
You could purchase up to a maximum of £25 per week, the cost depends on age and gender so you need to use the online calculator to work out the cost. (For a 65 year old man to purchase £1 a week it would be £890. Use www.gov.uk/state-pension-topup.
This additional state pension will be covered by the inheritance rules and depending on your date of birth will give surviving spouse or civil partner at least 50% of the additional state pension.
2013 autumn budget statement and changes on pensions
On 5 December 2013, the chancellor George Osborne presented his Autumn Statement. Some of the announcements had already been made previously, but many issues of concern to pensioners were not covered at all. Nevertheless, the main announcements affecting older people were as follows:
- From April 2014, the Basic State Pension (BSP) will rise to £113.10 a week in line with the September CPI figure of 2.7%, giving an increase of £2.95 a week and £1.80 for many women who receive a pension based on their husband's contributions. Had the RPI still been in place, the increase would have been 3.2%. It means over the year the basic state pension will be £28.60 less under CPI than under RPI. Until earnings regain their value, the RPI remains the best indices for uprating pensions.
- From April 2014, the state second pension and millions of public sector pensions will also rise by the CPI figure of 2.7%.
- From April 2014, the means-tested Pension Credit Guarantee for a single pensioner is likely to rise from £145.40 per week to £148.35 and from £222.05 per week for a couple to £226.80. This would give the Pension Credit the same actual cash increase as the basic state pension, rather than the same percentage increase, and follow the announcement the Chancellor made in March 2012.
- To qualify for the Savings Credit element of Pension Credit, an individual would have to have an income of £115.30 a week and a couple, £183.90. The maximum amount they could claim would then be £18.06 a week for a single pensioner and £22.89 for a couple. This is a reduction from £18.54 and £23.93 respectively.
- From October 2015, all those who reach pension age before the introduction of the single-tier state pension in April 2016 (including existing pensioners), will be eligible to buy extra National Insurance contributions as a way of boosting their state pension. The exact cost of the scheme is expected to be published shortly.
- From April 2014, the basic personal allowance for Income Tax for those aged under 65 will rise from £9440 to £10,000, but the Chancellor has stuck to his plans to freeze the age related personal tax allowances for someone aged 65 to 74 at £10,500 and for someone aged 75 or more at £10,660 until they align with the ordinary personal allowance. It is assume that in 2015 the under 65 allowance will catch up with the 65-74 rate and thereafter personal tax allowances will rise accordingly; including for pensioners.
- The Chancellor also reiterated the plan to introduce from April 2014 a transferable tax allowance for married couples and those in civil partnerships. Where one half does not have an income high enough to meet their tax allowance, they may transfer up to £1000 of that unused allowance to their partner. This will represent a tax break of £200 a year for around 8m couples, including pensioners.
- Interestingly, contrary to statements previously made by Labour shadow chancellor, Ed Balls, George Osborne announced that whilst spending on benefits would in the future be capped, the state pension would not be included. The Chancellor also announced that the Local Housing Allowance would rise next year by the CPI of 2.2%, but would then be capped at 1% until the end of the Parliament. Local authorities would also be given additional help to freeze council tax for a further year, if they so wished.
- The Winter Fuel Payment will remain at £200 for households with someone at or over the female State Pension Age and at £300 for households with someone aged 80 or over. From 2015, winter fuel payments will be restricted to people living abroad in countries that have an average winter temperature comparable with or lower than that of South West England.
- Hidden away in the Autumn Statement was a further proposal to give families a tax break if they build a 'granny flat' on their property. From April 2014, those with an annexe lived in by a family member will qualify for a 50% reduction in the council tax bill for that property. The government hopes that this will encourage more families to build extensions and look after their elderly relatives.
- However, the biggest announcement and the one which caused the most headlines the day before the Autumn Statement was the plan to accelerate the rise in the state pension age (SPA) in line with alleged rising life expectancy. The Government has already said that the SPA will rise to 66 by 2020 and 67 by 2028. In addition, the chancellor now plans to raise the SPA to 68 by around 2035 - affecting all those currently aged 46 or under. A further increase in retirement age to 69 is expected sometime around 2045, while those in their twenties are likely to see a SPA of 70 by 2055.The Treasury estimates this change will save the state up to £400bn over the next half century. An independent review will assess likely lifespans every five years and will issue its first report after the 2015 election. However, contrary to the chancellor's assertion, the Office for National Statistics latest figures show that longevity is falling. In 2009, men aged 65 were predicted to live a further 19 years and for women, 21.3 years. However, the 2013 data now shows the figures have fallen to 18.3 years and 20.6 years respectively.
The pensions bill has passed its commons stages and is now set for its second reading in the House of Lords on 3 December 2013.
The major provisions of the bill are still intact, including the single-tier pension which means in practice that a two-tier pension system could emerge. The bill means that existing pensioners and those who reach state pension age before 6 April 2016 who have a pension less than the full single tier pension amount would remain on a much lower pension indefinitely.
UCU supports the joint campaign of the public Service Pensioners' Council, Age UK, Civil Service Pensioners' Alliance, National Federation of Occupational Pensioners, National Pensioners' Convention and the Occupational Pensioners' Alliance. Letters have been sent to Lord Freud for the Government and Baroness Sherlock for the Opposition outlining our joint key concerns which are as follows:
- protection for current and future pensions by including the triple lock guarantee in the Bill. For current pensioners both the basic and additional pension need to be linked to the triple lock to prevent any gaps between entitlements growing
- ensuring that the Bill contains specific commitments to the introduction of a single tier Pension that is set at a level significantly above the means test
- clarifying the position around passported benefits, including Housing Benefit and Council Tax support, and ensuring that people do not lose vital additional help due to the introduction of the single tier pension
- introducing a 15-year transitional period for the derived benefits of those relying on a partner's contributions including widows and widowers.
We have also called for an early review to examine how all pensioners could be brought into the single tier pension on a no detriment basis with current entitlements secured.
68 is too late
Three trade unions have joined forced to launch a campaign against government proposals to increase the UK state pension age to 68. Unite, the Public and Commercial Services Union and the National Union of Teachers say the proposal to increase SPA from 65 to 68 is 'reckless' because it pays no attention to 'healthy life expectancy' as compared to longevity figures. The trio of unions has launched a website called 68istoolate.org.uk citing statistics which claim that healthy life expectancy has increased from 66.7 to 68.8 for women and from 64.4 to 67 for men, meaning a SPA of 68 would cut short a healthy retirement on average. The SPA is due to rise to 68 in 2044. Fight this it does not have to be like this.
Increase in State Pension age to 66
Table 1: Changes to state pension equalisation timetable (women)
|Period within which birthday falls||Date new state pension age reached||New state pension age (years.months)|
|6 April 1953-|
5 May 1953
|6 July 2016||63.2 - 63.3|
|6 May 1953-|
5 June 1953
|6 November 2016||63.5 - 63.6|
|6 June 1953-|
5 July 1953
|6 March 2017||63.8 - 63.9|
|6 July 1953-|
5 August 1953
|6 July 2017||63.11 - 64.0|
|6 August 1953-|
5 September 1953
|6 November 2017||64.2 - 64.3|
|6 September 1953-|
5 October 1953
|6 March 2018||64.5 - 64.6|
|6 October 1953-|
5 November 1953
|6 July 2018||64.8 - 64.9|
|6 November 1953-|
5 December 1953
|6 November 2018||64.11 - 65.0|
Table 2: Increase in state pension age from 65 to 66 (men and women)
|Period within which birthday falls||Date new state pension age reached||New state pension age (years.months)|
|6 December 1953-|
5 January 1954
|6 March 2019||65.2 - 65.3|
|6 January 1954-|
5 February 1954
|6 July 2019||65.5 - 65.6|
|6 February 1954-|
5 March 1954
|6 November 2019||65.8 - 65.9|
|6 March 1954-|
5 April 1954
|6 March 2020||65.11 - 66.0|
|From 6 April 1954||66th birthday||66|
Under the Pensions Act 2011 women's state pension age will increase more quickly to 65 between April 2016 and November 2018. From December 2018 the state pension age for both men and women will start to increase to reach 66 in October 2020.
These changes affect you if you're:
- a woman born on or after 6 April 1953
- a man born on or after 6 December 1953
The current law already provides for the State Pension age to increase to:
- 67 between 2034 and 2036
- 68 between 2044 and 2046
However, the government announced on 29 November 2011 that state pension age will now increase to 67 between 2026 and 2028. This change is not yet law and will require the approval of parliament.