Back to news 7 February 2013

State Pension: the only constant is change

We felt it was fitting that a phrase coined over 2,500 years ago was so relevant to a subject so closely related to time and age. As the philosophy of occupational pension schemes embarks upon a dramatic change in scenery, the State Pension is keen no to be left behind.

The State Pension is a regular payment you can receive once you reach State Pension age (SPA). The amount you receive depends on how many qualifying years of National Insurance Contributions (NICs) you have accumulated. Qualifying for the basic State Pension changed on 6 April 2011. You now only need 30 qualifying years of NICs (in the past, men normally needed 44 years and women 39 years).

In 2012-13, a single person can receive up to £107.45 a week in basic State Pension. The government has committed to restore the link between earnings and the basic State Pension with its "triple lock" guarantee. This provides that the basic State Pension will increase each year by the highest of:

  • Growth in average earnings;
  • Growth in prices; and
  • 2.5%.

State Pension Age

The 2011 Pensions Act increases the SPA to 66 by October 2020 - six years earlier than previously planned - and to 67 between 2034 and 2036. However, in the Autumn Statement, George Osborne confirmed that the SPA will rise to 67 between 2026 and 2028; although this change is not yet law and will require the approval of Parliament. You can calculate your SPA under the current law using Directgov's State Pension age calculator.

Did you know?

The age at which men could receive the State Pension was set at 65 in 1926; the life expectancy for a man was only 57! According to government figures there were nine people of working age for every pensioner in 1926. There are now only three people of working age for every pensioner and it is estimated that this will fall to nearer two by the end of the century.

The Road Ahead

The Pensions Act 2011 increases the SPA to 68 between 2044 and 2046. Although there have been no official changes to this, it would be highly surprising if this was not brought forward too. Furthermore, the government has announced its intention to introduce a flat rate State Pension. Detailed proposals for the new pension will appear in a White Paper to be published in the spring. Although it is unclear on what may finally happen to the State Pension in the future, the only thing we can be sure of is that the State Pension will continue to change.