Budget 2013: Flat rate pension to arrive a year early

Last updated: Mar 20th, 2013

Chancellor George Osborne has brought forward the introduction of the flat rate pension and the cap for long-term care by a year to April 2016.

The new pension date has been particularly welcomed by women born between 6 April and 5 July 1953, who have seen their pension age upped twice and would have been ineligible for the £144 flat rate pension had it not come in until 2017.

They will be around £9 a week better off than they would have been under the old system.

Reacting to the news, Joanne Segars, chief Executive of The National Association of Pension Funds (NAPF), said: “We strongly welcome proposals for a new, single-tier state pension. But the government has to ensure that the changes are implemented in a way that does not damage company pension schemes. 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. Businesses that get caught on the wrong side of these changes will lose a significant rebate from the end of contracting out, and this extra cost may prompt them to close their pensions altogether.

“We have waited many years for these reforms... It would be a shame if mistakes were made in a rush to implement the changes.”

Meanwhile, the cap on social care costs, which was also set to come in during April 2017 at £75,000 will now arrive in 2016 at £72,000.

This means that individuals will have to pay the first £72,000 of their social care costs, with the government footing the bill for the remainder of their lives.

However, research from the Equity Release Council out today found that among the over 60s, almost half think the government should meet the full costs of late life care. The research also revealed nearly a fifth of UK adults feel that support for care costs, as well as residential costs, should be means-tested.

Find the best annuity rate for your circumstances

Greater certainty for retirees

Commenting on the reforms, Patrick Connolly, spokesperson for AWD Chase de Vere, said: "The decisions to bring forward the implementation of a universal state pension and the social care cap are both welcomed. Both should provide greater certainty for those planning for their own retirement or for their relatives.

He added: "The social care cap will allow people to plan for care costs without facing potentially open-ended liabilities, while the universal state pension should effectively herald the end of means testing in retirement and so people should benefit from every penny that they manage to save for themselves."

Your Comments

Under the new flat rate pension, How much pension will someone get who has not worked a day in their life ??

"Great" an extra £9 per week in 2016 instead of 2017 that's all well and good but do people realise that in three years time £9 is going to be worth a lot less than it does now. The strange thing for me is I receive a basic state pension plus pension credit and both of them combined add up to £142, so the flat rate pension of £144 gives me an extra £2 in 2016. Going be the rate of inflation I wont even be able to buy a loaf of bread in 2016 with the extra money.
 

Malcolm P :  Probably more in benefits that are means tested, to ensure they have not been squirrelling money away needlessly for their retirement. Some people have even been found saving out of taxed income which is despicable.

My wife and I started work at 15 and paid in to the kitty for 95 years between us.  We now get the basic pension each and, as I understand, will contnue to do so after 2016.  In order to get the pension she now gets my wife even had to pay a contribution for the period she did not work to have our family and when I was made redundant and was out of work for 6 months I got NO benefits or payment.  I am afairly intelligent person but cannot understand why I should accept that people who retire in 2016 will get a much more generous pension most of whom will only have to have paid in for far fewer years than we have.  This needs to be addressed for the huge number of people who are in the same boat as us.  The more you have paid in the less you get back!

I have a weekly Govt pension of £68.75. Why? Because I am just 5 years younger than my husband I was advised by HMRC (or whatever they were called in my younger years) and the CAB that there was no advantage to me paying the "full stamp" and that I would just be wasting my money! In latter years I paid the full stamp and on attaining the age of 60 was told I could either have £27 a week on my contributions or £47 per week on my husband's - no contest.
Now I understand that I will not be able to have my pension lifted to the £140 - through no fault of my own and bad advice given to me for many a year. Quite frankly I feel sickened by the whole shoddy process.
Anna

The rip off of those who have paid into the system via additional NI contributions into SERPS and S2P will occur a year earlier then

Don't forget, though that the increase of 5 years NI contributions still stands.
We both retired 2.5 years ago (after being made redundant) as we both had 30 years in and my projections showed that we could have a better quality of life rather than slaving for the minimum wage.
Now, with the changes that have happened since then, it looks like at least one of us will have to go out and take a job that could be assigned to a young person starting out.

Under the new flat pension I will be worse off as I have received a Pension estinate of £164.00 per week. If I lose approx £20.00 it is stealing or  will some arrangements be made for the hundreds of thousands in similar position. Also, when the flat rate pension is in you only need 35 years contributions. I already have 44 years, so do I get a refund of 9 years contributions?

I totally agree with your comments and cannot understand why more people have not protested against this unfairness.
The start date for this increased pension has already changed a few times already and it would make sense for government to sit down right now and properly think the changes through . Where are all the interest groups and newspaper comment on the lack of transitional changes that protect the population retiring between now and 2016 and who will lose out despite some having paid in 49 years worth of contributions . There is no good reason why the new flat rate pension could not have been gradually phased in for all pensioners who have contributed over their working life .