Five Questions About: State pension reform


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The Independent Online

Reform? What is the government doing now?

It plans to replace the existing state pension system, where payouts include the basic state pension, S2P+Serps, graduated pension and savings credit, with one new single-tier pension.

Will I be worse off?

That depends. The self-employed and women will become eligible for the new single-tier state pension rather than the lower pension they have now. But high earners, who pay more National Insurance, will no longer qualify for a higher pension. Meanwhile, those in a "contracted-out" pensions scheme, such as teachers and nurses, will pay higher NI contributions.

Does that mean many will be better off?

Department of Work and Pensions figures show that for those retiring in 2040 about 45 per cent will be worse off, 35 per cent better off and 20 per cent the same under the proposed new single-tier state pension.

Will everyone get the new pension?

No. You will need to have 35 years of NI contributions to get the full pension. Fewer years will mean a lower payout and those with less than 10 will get nothing.

When will the new scheme come into operation?

It's planned for 2017 at the earliest.

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