Pension Reforms: How Will They Affect You?

As the new tax year starts on 6 April 2010 so too does the introduction of pension reforms which will affect the timing of when you can claim your pension and the amount you’ll be able to claim. We look at how these pension reforms will affect you.

The pension reforms come into effect at various times from 2010 onwards. We look at those that will start to be introduced from 6 April 2010.

Minimum age to claim or personal or company pension

From 6 April 2010, the minimum age that you will able to claim a personal pension will be 55, up from the current age of 50. Under certain circumstances, such as ill health, you may still be able to take your pension before you are 55. You can put off taking it until you are 75.

Qualifying for a State Pension

As a result of the pension reforms, from 6 April 2010 more people will be able to claim a full state pension. This is because the number of years’ worth of National Insurance contributions you need to have made to qualify will drop to 30 years. Currently it stands at 44 years for men and 39 years for women. The new 30 year requirement will apply to both men and women.

Whilst this will be seen as a positive by many, the fact that the age at which you’ll be able to claim a State Pension is going up may not be. By 2020 both men and women will have to be 65 before they can claim a State Pension. The rise in age is being phased in over the next 10 years. You can get more details on the Government website.

You can already choose to put off claiming your State Pension for as long as you want. When you do claim you can choose to get either extra State Pension for the rest of your life, or receive a one-off, taxable lump-sum payment (which will be equivalent to the State Pension you put off claiming plus interest) as well as your regular weekly State Pension.

What about if you are a parent or carer?

The pension reforms will help you if you are a carer, for example a parent with a dependent child under age 12, an approved foster carer or are caring for severely disabled people for at least 20 hours per week.

As an eligible carer, if you reach State Pension age on or after 6 April 2010, you may be able to build up entitlement to the State Pension through new National Insurance credits. Also, any awards of Home Responsibilities Protection (HRP) you have from past years will be converted into years of credits.

What about if you are married or a civil partner?

Currently, some married women can get an increased basic State Pension based on their husband’s entitlement. From 6 April 2010, married men and Civil Partners will also be able to do this. And you will not need to wait until your Spouse or partner claims their State Pension.

What’s the impact on the Adult Dependency Increase?

From 6 April 2010 you will no longer be able to claim an Adult Dependency Increase. This is an increase in your State Pension for another adult if he or she is considered to be financially dependent on you, for example a wife, husband or someone who is looking after your children. Get more details on the Government website.

What about Pension Credit?

Pension Credit is provided to ensure that people who are 60 or over get a minimum level of income. From 6 April 2010 the age that you can get Pension Credit will gradually increase from 60, in line with changes to State Pension age.

Do you already receive a State Pension?

In this case the pension reform will have minimal impact on you. The basic State Pension will though increase in line with earnings from 2012 at the earliest, meaning that it should rise more quickly each year than currently.

Do you need more pension information?

General pension information is available from The Pensions Advisory Service, The Pensions Service and from the Financial Services Authority (FSA).

Charities such as Citizens Advice, Age Concern and Help the Aged may also be able to help.