Y o u r M o n e y
State Pension Changes made in April
that will probably Affect You! Lieutenant Commander David Marsh from the Forces Pension Society (FPS) picks out some of the more radical changes likely to affect most serving personnel today.
L
ord Turner made an announcement in November 05 outlining the Pension Commission’s
recommendations for changing the State Pension. Te recommendations were to ensure the State Pension system met modern social patterns and remain affordable. Te Government accepted most of the reports recommendations and will gradually implement the changes from April this year. Anyone reaching State Pension age on or aſter 6th April 10 will be affected by the changes, and that probably means you!
The good news
First, there is some fantastic news that was not part of the Pension Commission’s report: wives, husbands and civil partners who accompany their Armed Forces spouse or civil partner on an assignment outside the United Kingdom will be entitled to claim Class One National Insurance credits for the period that they were accompanying their Armed Forces spouse or civil partner.
The legislation came into force on 6th April 10 and the Department of Work and Pensions (DWP) will issue a fact sheet on
this improvement imminently. Applications will not be accepted for periods before 6th April 2010 but applications should be made to HM Revenue & Customs for periods straddling or after this date. Furthermore, the significance of the credits being Class One (as opposed to the usual Class Three), is that they will also entitle individuals to claim other contributory-based State Benefits such as Jobseeker’s Allowance; Employment and Support Allowance.
More good news As with any changes to a pension scheme there is bad news as well as good. First, some more good news: there is a reduction in the number of qualifying years of National Insurance contributions and/or credits needed to be eligible for a full basic State Pension.
Before 6th April you would have needed to have completed 44 years of National Insurance contributions and/or credits in order to have earned a full basic State Pension (women born between 6th April 1950 and 5th April 1955 needed less). However, anybody reaching State Pension age from 6th April 10 will only need to have National Insurance contributions and/or credits for 30 qualifying years in order to have entitlement to a full basic State Pension.
Regrettably, this does not mean to say that you will not have to pay National Insurance contributions on your salary once you have achieved the 30 qualifying years! You will still continue to pay National Insurance contributions on your salary until you reach State Pension age, just as you do now, but if you happen to be out of work after achieving the 30 qualifying years, you do not have to march down to the
32 Summer 2010
local Job Centre and sign on for Jobseekers Allowance to ensure that your National Insurance contributions record will give you a full basic State Pension as if you were in full-time employment. However, your National Insurance contributions record also provides for other Social Security benefits, so it is usually worth your while ‘signing on’ anyway.
What a State Pension is worth From 12th April 2010 the full basic State Pension is worth £5,077 per year; that is almost half of a Sergeant’s pension after 22 years’ service – not something to turn your nose up at.
Another improvement akin to this reduction in qualifying years is that the ’vesting period’ has reduced to one year; that means to say that anyone reaching State Pension age on or after 6th April 10 only needs to have one year of National Insurance contributions or credits to be eligible for a basic State Pension, as opposed to the 10 or 11 year requirement under the old regime.
The bad news The bad news is that you are likely to have to wait longer than the current State Pension age 65 (60 for women) before you become eligible to have your State Pension put into payment. Women’s State Pension age will increase from 60 to 65 between 6th April 2010 and 5th April 2020. Legislation is in place to increase the State Pension age from 65 to 66, between 2024 and 2026 (there is a sliding scale of between 65 and 66 over that two year period). Then, between 2034 and 2036 the State Pension age goes up from 66 to 67; and finally, between 2044 and 2046 the age increases another year from 67 to 68.
www.raf-ff.org.uk
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