Wealth Design News

A new state pension was introduced on 6 April 2016. The full amount of the pension is currently £164.35 for 2018/19 (£168.60 2019/20).

It has replaced entitlement to previous state pension benefits, including the Basic State Pension and Additional State Pension (including shared additional pension and graduated pension).

Its main features are:
• To qualify for the full level of the new state pension an individual will need to have 35 qualifying years of national insurance (NI) contributions (paid or credited) by SPA. Where an individual has less than 35 qualifying years by SPA, he/she will receive a proportionately reduced benefit. There is a minimum period to qualify for any benefit of 10 years.
• The entitlement to the new state pension is assessed on an individual basis, without the previous facility to inherit or derive benefit rights from a spouse or civil partner. However, there are transitional provisions to recognise shared or inheritable additional state pension accrued before 6 April 2016 and also for certain married or formerly married women who paid reduced rate NI contributions.
• The uprating basis of the new state pension is the ‘triple lock’ as still applies to the old basic state pension.
• Where an individual has accrued a state pension under the pre-6 April 2016 basis at that date in excess of the full level of the new state pension as a result of transitional protection (see section 4 below), the excess will be revalued to their SPA and increased in payment in line with CPI inflation.

The new state pension can be deferred beyond SPA, in return for a higher benefit. An individual who reaches the SPA on or after 6 April 2016 will still be able to defer its receipt. However, the rules surrounding the deferral are different to the old basic state pension deferral and have changed to the following:
• Individuals will need to defer for at least nine weeks.
• The rate of increase during deferral is 1% for every nine weeks deferred, i.e. an increase of just under 5.8% for each full year of deferral.
• There will be no lump sum option.
• It will not be possible for a surviving spouse or civil partner to inherit deferred new state pension. However, the deceased’s estate may claim up to three months of the deceased’s arrears.
• If an individual or their partner is in receipt of certain state benefits such as universal credit, then deferring state pension will not increase the state pension payable.
State pension rights accrued up to 5 April 2016 are protected. From 6 April 2016, everyone will have their pre-implementation NI record used to establish a ‘foundation amount’.