Pensions - changes to the law
This page tells you about some changes made by the Pensions Act that could affect your State Pension. It also gives details of some of the benefit rates which apply from April 2008.
The Act only applies to Great Britain but it is intended that Northern Ireland, which has its own pensions legislation, will make corresponding provision for its customers in due course.
After the White Paper Security in retirement: towards a new pensions system was published, the Government introduced the Pensions Bill, which has now become the Pensions Act 2007 and the Pensions Act (Northern Ireland) 2008.
The Act has made the following changes for people reaching State Pension age on or after 6 April 2010:
- Only 30 qualifying years will be needed for a full basic State Pension. (A qualifying year is a year that counts towards your basic State Pension because enough National Insurance contributions were paid, treated as paid or credited to you in that year).
- From 2010 Home Responsibilities Protection will be replaced by a new system of credits for parents, foster carers and people caring for 20 hours a week or more for the severely disabled which will count towards both basic State Pension and State Second Pension.
- National Insurance credits will be awarded for periods you were covered by Home Responsibilities Protection before 2010. (Home Responsibilities Protection reduces the number of years you need to work to get a full State Pension if you are not earning and are caring for someone, for example an elderly relative or your children.) Having credits for these years means that they count towards your basic State Pension.
- People with very few qualifying years will get at least some basic State Pension.
Additionally the State Pension age will increase from 65 to 68 between 2024 and 2046.
The Act also provides for the basic State Pension to still be based on the number of qualifying years you have built up through National Insurance contributions (whether paid, treated as paid or credited).
Paying voluntary National Insurance contributions
You can pay voluntary class-3 National Insurance contributions to make up the qualifying years needed to get a higher or full basic State Pension. However, the number of qualifying years you need to qualify for a full basic State Pension has been reduced to 30 years for people reaching State Pension age on or after 6 April 2010, so you may want to consider carefully whether you need to pay voluntary class-3 National Insurance contributions.
The Pensions Act is available on the DWP website
Changes to benefits rates and limits
Below are the pension benefits and earnings limits for 2008/09. The rates for 2007/08 are also shown so you can see how the changes will affect you.
| State Pension rates (weekly) | 2007/08 | 2008/09 |
|---|---|---|
| Basic State Pension (based on your own National Insurance contributions) | £87.30 | £90.70 |
| Basic State Pension (based on your partner's insurance) | £52.30 | £54.35 |
| Pension for people aged 80 and over | £52.30 | £54.35 |
| Minimum basic State Pension | £21.83 | £22.68 |
| Maximum additional State Pension | £148.14 | £151.10 |
| Pension Credit (weekly) | 2007/08 | 2008/09 |
|---|---|---|
| Standard minimum guarantee credit - for a single person | £119.05 | £124.05 |
| Standard minimum guarantee credit - for a couple | £181.70 | £189.35 |
| Maximum savings credit- for a single person | £19.05 | £19.71 |
| Maximum savings credit-for a couple | £25.26 | £26.13 |
| Earnings limits | 2007/08 | 2008/09 |
|---|---|---|
| Lower earnings limit - weekly | £87 | £90 |
| Lower earnings limit - yearly | £4,524 | £4,680 |
| Primary threshold - weekly | £100 | £105 |
(The primary threshold is the point at which you have to start paying class-1 National Insurance contributions if you work for an employer. You have to pay contributions on anything you earn above this level.)
| 2007/08 | 2008/09 | |
|---|---|---|
| Low earnings threshold - yearly | £13,000 | £13,500 |
| Upper earnings limit - yearly | £34,840 | £40,040 |
| Earnings limits for dependency increases (weekly) | 2007/08 | 2008/09 |
|---|---|---|
| For a couple who are living together | £59.15 | £60.50 |
| For a couple who are living apart | £52.30 | £54.35 |
A dependency increase is an increase in your State Pension for someone who depends on you financially (such as your wife, your husband or someone who looks after your children for you). If you claimed a State Pension before 6 April 2003, you may get an increase for your children as long as you are entitled or are treated as entitled to Child Benefit for them.
| Personal tax allowances (yearly) | 2007/08 | 2008/09 |
|---|---|---|
| People under 65 | £5,225 | £5,435 |
| People aged 65 to 74 | £7,550 | £9,030 |
| People aged 75 and over | £7,690 | £9,180 |