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Queen’s Speech: what do the changes mean for you?

Tahmina Mannan
Written By:
Tahmina Mannan

We explain how today’s announcements on pensions and social care could affect you and your family.

It was confirmed today in the Queen’s speech that the Government will introduce a Pensions Bill which will create a simple, flat rate pension that encourages saving and helps women who have had long career breaks.

The Bill is a landmark piece of legislation and is set out to overhaul the whole pensions system. The Bill will introduce a single tier pension scheme in a bid to encourage saving, and will also increase the state pension age to 67 by 2026.

The new state pension, set to come into force in April 2016, will be based purely on an individual’s National Insurance contributions (NI); no one else’s contributions will be taken into account.

It will be worth up to £144 a week, but to qualify for the full sum the retiree will need to have worked and made NI contributions for at least 35 years.

Anyone who does not have enough NI contributions of their own will no longer qualify for a state pension.

The Bill will also will end the concept of a second state pension – which allows people to opt out of some National Insurance contributions and pay more money into a private scheme.

The Pensions Bill is designed to introduce reforms which will “make it clearer to people what they will get from the state when they retire, reduce means-testing and provide a firmer foundation for saving.”

Also announeced today was a Bill which will provide assistance and financial support for carers who have to take out time from their work to look after elderly or sick friends or family.

The Government has set out £150m to cover the cost of assistance for carers.

Stephen Lowe director at retirement income specialist, Just Retirement, said he thought the inclusion of new social care legislation was symbolic of changing priorities:

“Care needs affect many, many people in the UK and those involved in the sector will be pleased to see the Government putting its weight behind major reforms to the system of adult social care.

“As the number of elderly people increases, it is vital they understand how the system works and the potential impact that care needs can have on their lives, their families and their finances.

“It is up to the Government and us in the financial sector to work together to ensure that people have access to products that can help protect against unexpected changes in their circumstances, and also access to professional advice so that people can understand their options and make intelligent choices.”

The Bill will also introduce a new system of social care funding from 2017.

This will mean that the public purse will pick up the care bill after someone has spent £75,000 of their own money for their care needs. The cap amount is not finalised and can be anywhere between £72,000 and £75,000. However according to the National Pensioners Convention, this Bill is set to only affect 1 in 10 people.