Single-tier state pension introduced

Implementation date: 6 April 2016

The Pensions Act 2014 introduces a new state pension for people reaching state pension age on or after 6 April 2016. The State Pension Regulations 2015 (SI 2015/173) set out some of the detailed rules of the new scheme. In particular, they:

  • specify the minimum number of years of national insurance contributions or credits a person will need to qualify for any new state pension;
  • specify the rate at which a person who defers claiming their new state pension will accrue an increase to their new state pension when they finally claim it;
  • provide that the new state pension will not be payable to prisoners, except in certain circumstances;
  • make transitional provisions enabling a person in the new state pension scheme to inherit a deferral payment where their deceased spouse or civil partner had deferred an old state pension;
  • amend regulations relating to the sharing of state scheme rights following divorce or dissolution of a civil partnership, as a consequence of new arrangements for state pension sharing; and
  • end contracting out for defined-benefit schemes.

The end of contracting out will mean an end to national insurance rebates for individuals and an increase in national insurance contributions for employers and employees who are members of previously contracted-out schemes. The Act gives private sector employers the power to increase employees' pension contributions and reduce pension accrual to take account of the abolition of contracting out.

The State Pension (Amendment) Regulations 2016 (SI 2016/227) set the new flat rate pension rate at £155.65 per week with effect from 6 April 2016.