Some 400,000 more people will be eligible for a revamped state pension after Chancellor George Osborne brought forward the start date by a year to April 2016.
The commencement of the new flat-rate state pension, worth £144 a week, means that thousands more people reaching retirement in three years’ time will qualify for the pension, including around 85,000 women who would have missed out during changes in qualification ages.
But the measure, which had been trailed ahead of the Budget, was met with concern from pension fund administrators that firms may struggle to meet the new deadline to adopt the reforms and provoke a fresh round of closures of increasingly-rare final salary schemes.
Mr Osborne insisted that the reforms, which will see the weekly income of those who qualify rise from £107 to the new rate, would give employees a “fair deal”.
The Chancellor said that an employee who is 40 years old when the single tier pension comes into force and who has always opted-out of the optional second state pension will pay an extra £6,000 in National Insurance over the rest of their working life but would get an extra £24,000 in state pension during retirement.
Pensions experts said the measures, which will coincide with the introduction of automatic enrolment in workplace pension schemes, meant the additional burden of National Insurance contributions for employers and employees alike could force the closure of final salary schemes.
The reforms spell an end to “contracting out” in occupational pension schemes under which employees and employers in final salary pensions could opt out of the second state pension and make reduced National Insurance contributions.
Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said there was a risk that the changes could damage company pension schemes.
She said: “This is a very tight timeframe and we question whether it can be delivered. Schemes need flexibility and time to adapt. If the Government gets it wrong then it risks sparking a fresh round of final salary pension closures in the private sector.”
Case study: The fiftysomething
Ian Barnett, 57, of Barrowford, Lancashire: "I retired from the health service at 50 and have been looking for a new job for two years. I'm already in line to receive a private pension but I'm happy to hear the flat-rate pension has increased. I welcome the promise of 600,000 more jobs in the private sector, but I would have liked to have seen it targeted more towards the old and the unemployed."Reuse content