George Osborne announced a new single-tier flat-rate state pension that will be set above the means test, estimated at around £140 per week. This will simplify the current system by replacing the basic state pension and additional state pension with one pension. People reaching state pension age on or after April 6, 2013 will receive this new pension, while existing pensioners will remain on the current system. The new single-tier pension is intended to be no more costly than the current system and will only apply to those retiring after its implementation in 2016.
1. Presenting his Budget statement, Chancellor
George Osborne said: “Over time we will
simplify the tax system for pensioners by
Budget 2012
doing away with the complexity of the
additional age-related allowances for anyone
Pensioners will receive a flat-rate state pension from 2016
reaching the age of 65 on or after 6 April
2013 and I will freeze the cash value of the
allowance for existing pensioners until it aligns The Chancellor Mr Osborne confirmed by a single scheme, will cost no more implementation. Pensioners already
with the personal allowance. during his Budget 2012 speech a pledge to than the existing state pension system. receiving the state pension will not
combine the two state pensions into one move onto the new scheme.
“We want to simplify the Basic State Pension simplified pension, as well as increasing Small or no contributions
and its interaction with the second state the state pension age automatically in line This means that while those on low Mr Osborne also announced that an
pension. So I can confirm that we will introduce with rises in longevity. incomes who have made small or automatic review of the state pension
a new single tier pension for future pensioners, no contributions to S2P will benefit age (SPA) would be introduced to
set above the means test. This is currently The full Basic State Pension is currently from a higher pension than they take account of increases in longevity.
estimated at around £140. It will be based on £102.15 a week, rising to £107.45 from could currently expect, people who Details of how this will be done will
contributions. And it will cost no more than April this year. Pensioners will receive earn higher salaries may lose out. be published alongside the Office
the current system in any year. We will bring a flat-rate state pension, initially it is The current full basic state pension is for Budget Responsibility fiscal
forward further details later this spring.” estimated that it will be worth about £102.15 a week (rising to £107.45 from sustainability report.
£140 a week for those with a 30-year April 2012), but those at the top end of
The complexities of the upcoming automatic national insurance record, from 2016. the salary scale can expect up to £180
enrolment process meant that alongside the a week in combined pension payments. GET IN TOUCH
existing state pension setup, some employees Long-awaited change To review the key issues that should
enrolling into a workplace pension scheme The government says the long-awaited Retiring after be on your agenda following Budget
would actually have found themselves change, which will see the current basic implementation 2012, please email or telephone us –
penalised financially when they reached state pension and second state pension The flat rate pension will only and we’ll get in touch.
retirement – a wholly unattractive prospect. (S2P, formerly known as Serps) replaced apply to those retiring after