Pensions Act 2007
Basic State Pension
Basic State Pension is the retirement income you can claim once you have reached State Pension age if you have paid or been treated as having paid sufficient National Insurance contributions, or received credits during your working life. Key changes to basic State Pension include:
- reducing the number of qualifying years needed for a full basic State Pension to 30 for people who will reach State Pension age on or after 6 April 2010
- any number of qualifying years will give entitlement to at least some basic State Pension
- people who have fewer than 30 qualifying years will get 1/30 of full basic State Pension for each qualifying year they have
- both paid and credited National Insurance contributions will count towards basic State Pension in the same way
- replacing the system of Home Responsibilities Protection (HRP)
with a new weekly National Insurance credit for people caring for children
or severely disabled people and converting past years of Home Responsibilities
Protection into years of credits.
Find out more about this - increasing basic State Pension in line with earnings, rather than prices, which means it should rise more quickly each year than it does now. (This change will happen from 2012 at the earliest and by 2015 at the latest, and will also apply to people currently getting their state pension or who reach State Pension age before 6 April 2010)
State Second Pension
The State Second Pension is paid in addition to the basic State Pension. This pension is also known as additional State Pension or S2P. It replaced the State Earnings Related Pension Scheme (SERPS) in April 2002. Key changes to State Second Pension include:
- allowing people to combine National Insurance contributions from earnings in part of a tax year with credits for other parts of the same year in order to gain a qualifying year for State Second Pension
- making it easier for people caring for children or severely
disabled people to build up entitlement
Find out more about this - changing the way it builds up so that in the future it will provide a simple, flat-rate weekly top-up to the basic State Pension
- First, for people earning up to £13,000 a year or getting credits for S2P, it will start to build up at a flat rate of £1.50 a week (both figures in 2007/8 money) for each qualifying year. The exact date from which this will start has yet to be fixed but it will be between 2012 and 2015. After that, the current earnings related element will be gradually withdrawn so that people will build up entitlement on a completely flat-rate basis by around 2030 or shortly afterwards
It is possible to contract out (opt out) of the State Second Pension if you are in a private pension scheme which meets certain conditions. From 2012 at the earliest, contracting out into a private pension scheme on a defined contribution basis will no longer be allowed.
Find out more about contracting out of the State Second Pension
Parents and carers
Working and caring will be recognised equally in the reformed State Pension scheme, with more women and carers being eligible for a full basic State Pension and for State Second Pension.
From 6 April 2010, more people who are not paying National Insurance contributions will be able to build up entitlement to basic State Pension and State Second Pension through a new weekly National Insurance credit. The people who will be eligible for these new credits are:
- people who are getting Child Benefit for children up to the age of 12
- approved foster carers
- caring for at least 20 hours a week for people who are getting Attendence Allowance, Disability Living Allowance (the middle or highest rate care component) or Constant Attendence Allowance
- having caring responsibilities for at least 20 hours a week for other people who need care. The details are still being developed.
People who pay National Insurance contributions for part of a tax year and qualify for the new credits for the rest of the tax year will be able to combine them to gain a qualifying year for basic State Pension and State Second Pension.
Home Responsibilities Protection (HRP), which is only given for full tax years, will be abolished. Past years of HRP (up to a maximum of 22) will be converted into qualifying years of credits which will count towards basic State Pension.
State Pension age
State Pension age is the earliest age at which you can claim your State Pension. At present the age at which men and women can claim their State Pension is different. Men can get their State Pension from 65 but, until 6 April 2010, women can get theirs at 60.
State Pension age for women will increase to 65 so that the State Pension age will be the same for both men and women by 2020. This change will be phased in from 2010.
The Pensions Act 2007 and the Pensions Act (Northern Ireland) 2008 provide for the State Pension age for both men and women to rise from 65 to 68 in stages between 2024 and 2046.
To find out when you will be entitled to claim your State Pension, use our State Pension age calculator
Other State Pension changes
People who claim State Pension on or after 6 April 2010 will not be able to claim extra money for their spouse or civil partner. People who are already getting this extra money (known as an Adult Dependency Increase, or ADI) before 6 April 2010 will keep it, but only until 2020 at the latest.
From 6 April 2010, a married or separated woman who needs to use her husband’s National Insurance contributions for her pension will be able to claim this once both she and her husband have reached State Pension age. She won’t have to wait until he has actually claimed his pension. (The same will apply to a married man or a civil partner whose wife or civil partner was born after 5 April 1950, if they need to use their wife’s or civil partner’s contributions).
Visit our glossary
for further explanation of the terms used on this page