Flat Rate State Pension 2017 Explained

Flat Rate State Pension 2017 Explained.

The Government will today unveil its brand new flat rate State Pension starting probably in 2017.

Flat Rate State Pension Explained:

• Starting in April 2017
• Flat Rate £144 per week for 35 years National Insurance Contribution Record (currently 30 years, but used to be 90% of working life around 39/44 years female/male)
• Credits given for when unemployed or Home Responsibilities Protection i.e.  parent at home in receipt child benefit
• Replaces current full state pension £107.45 per week plus Pension Credit Minimum Income limit which would be £142.70 per week.
• State Pension will continue to be increased in line with earnings unlike other benefits which will be capped at 1% pa rises until 2016.
• National Insurance will continue to be paid at current levels or increased in some cases.
• Second Tier State Second Pension (S2P), State Earnings Related Pension (SERPS) and State Graduated Pension credits will disappear.
• Contracting out of S2P/SERPS rebates have already stopped for private pension schemes.
• The ‘Contracting out’ national insurance rebate will continue to be paid to occupational pensions such as Career Average and Final Salary pensions
• Around 1.5m Members of ‘Contracting Out’ pension schemes, such as public sector workers, may face an increase in National Insurance Contributions to reflect the fact that they will receive the higher flat rate state pension but also still have their ‘contracted out’ occupational pension scheme benefit subsidised by the ‘contracted out’ national insurance rebate repaid to the pension scheme.
• If you have less than 10 years National Insurance Contributions or Credits you will receive no State Pension.

Our view
This is stealth tax, which will reduce the government’s liability to State Pension Provision, by removing the second tier state pension benefits such as S2P and SERPS, but both employers and employees will still pay the same National Insurance Contributions.  In short, the working masses are again subsidising.

1. Pensioners who will receive their benefits if they retire before 2017,
2. People on very low incomes, those unemployed, those with home responsibilities protection or those with long term sickness or disability who will receive a higher state pension without fully contributing to the National Insurance System.

There are of course winners such as the self employed, but we guess they will face higher national insurance rates to bring them into line with employees and employers national insurance contribution rates.  Losers will be new workers and many current workers that do not retire before 2017 with these changes and we respect the Government must reform to cut the overall welfare bill in this country.