Pensions minister confirms 2016 flat-rate state pension start date
In a written ministerial statement, he said following the positive response to January’s White Paper, The single-tier pension: a simple foundation for saving, ministers have decided the reforms can be delivered before the 2017 target.
The new flat-rate pension means retirees will get £144 per week in today’s money.
Webb said about 400,000 more people will reach state pension age under single tier, including every woman affected by the acceleration of the equalisation of the state pension age.
Webb said: “Our reforms will create a simple, decent state pension, which is set above the basic means test sooner. The new state pension will be fairer to the low-paid, the self-employed and carers and make it easier for people to understand what they will get from the state when they reach state pension age.
“By introducing single tier in 2016, every woman affected by the changes we have made to the state pension age in this parliament will also now have access to the new state pension.”
Workers will no longer be able to contract out of the state second pension as a result of the reforms.
Webb explained those people who were contracted out will see their National Insurance (NI) contributions equalise to the same rate as the rest of the population.
However, he added they would also build up access to the same flat-rate state pension, set above the level of the basic means test.
“I can also confirm that 90% of affected individuals reaching state pension age in the first 20 years of the single tier will receive more state pension than the additional NI they pay. As stated previously, this will result in additional NI revenue for the Exchequer. About £3.3bn is employer NI contributions from the public sector and so in effect a transfer within the public sector,” Webb explained.
“Of the rest of the revenue, £0.6bn is employer NI contributions from private sector, £1.4bn is employee NI contributions from public sector and £0.2bn is employee NI contributions from private sector – this money will not be used for net revenue raising.
“As per standard practice, the detail of these fiscal impacts will be accounted for in the Budget on Wednesday.”