State pension reform
The Queen’s Speech outlined plans for legislation that will introduce a flat-rate state pension for new pensioners. The current state pension is £107.45 a week for those with a complete National Insurance record and can be increased to £137.35 with pension credit. The flat rate of £140 a week (rising to £155 by 2016) will take many people out of means-tested benefits.
The flat-rate pension will be available only for new pensioners reaching state pension age after its introduction.
Increase in State Pension Age
State Pension Age will rise to 66 for both men and women by 2020 and to 67 between 2026 and 2028, affecting all those aged 52 or younger currently.
The Queen’s Speech confirmed also that in future State Pension Age will rise automatically, in line with increases in longevity, either through a formula linking pension age to average life expectancy or through a regular official review.
Public sector pensions
The Queen’s Speech confirmed the Government’s intention to proceed with the reform of public sector pensions, by:
- changing public sector pensions from a final salary structure to one based on career average earnings and
- increasing the age at which members can draw their full pension.
The Government says that this will make public sector pensions sustainable, with costs shared ‘more fairly’ between employers, workers and taxpayers. This is unlikely to provide much cheer for those employed in the private sector whose own final salary schemes have been replaced with far less generous defined contribution arrangements!