It has been proposed that from 2017 a new flat-rate state pension will be paid – worth in today’s money £144 a week.
Details will no doubt change over time but some of the information available so far is listed below:
• As stated above the starting rate April 2017 will be £144 per week, £7,488 annually, based on current value of money. This will likely rise to approximately £160 per week when changes in the value of money are taken into account.
• This is good news for self-employed retiring April 2017 as currently they are only entitled to the basic state pension of £107.45 per week. We will have to wait and see if self-employed National Insurance contributions, Class 2 and 4, will increase to compensate.
• Contracting out and the present second state pension will be abolished and this will increase National Insurance costs for those employers with contracted out employees.
• The minimum number of years that you need to make National Insurance contributions is increasing from the present thirty years to thirty five years.
• Government is also reintroducing a minimum qualification period. Persons with less than ten years of NI contributions will not get a state pension.
• Persons retiring before April 2017 will continue to receive benefits previously paid. If this is less than the flat rate they will lose out, if more the higher amount will continue to be paid.
A 65 year old would need a pension pot of over £200,000 to generate a weekly pension of £144 so the new flat rate scheme is not ungenerous. However, there will be winners and losers.