e-mail Paul Lewis on paul@paullewis.co.ukGordon Brown’s announcement in November that the basic state pension would rise by £5 a week for someone who paid their own National Insurance contributions and by £3 a week for a married woman claiming on her husband’s contributions was widely welcomed. But as with many things the Chancellor announces, what he gives with one hand he partly takes back with the other. And some people will be very disappointed when they get their new rate of pension in April.
Adding £5 onto the basic state pension of £67.50 is a rise of 7.4 per cent. But most people will find that the pension they get from the week of April 9 2001 will not be 7.4 per cent higher than the one they get now. That is because some parts of the retirement pension are going up not by 7.4 per cent but by 3.3 per cent – the rate of inflation in September 2000.
The state retirement pension that people earn is in several parts.
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Almost everyone gets some basic retirement pension based on their own or their husband’s National Insurance contributions. It is normally £67.50 or £40.40 for a wife claiming on her husband’s contributions. But it can be less if you (or your husband) had a poor National Insurance contribution record.
The basic retirement pension earned on your own or your husband’s contributions will rise by 7.4 per cent – representing £5 on the full retirement pension of £67.50 a week and £3 on the full £40.40 paid to a married woman on her husband’s contributions.
Most people also get
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Graduated retirement benefit – also called also called graduated pension – based on graduated contributions paid at work between 1961 and 1975·
Additional pension – also known as SERPS based on contributions paid on earnings from 1978. For technical reason, even employees who contracted out of paying into SERPS will get normally some additional pension.
Graduated retirement benefit and additional pension are rising by just 3.3 per cent – the rate of inflation at September 2000.
And some people get as well
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Increments to their pension earned by putting off claiming it beyond pension age. You can defer your pension for up to five years and get around £5 a week extra for each year – and even more if you have some additional or graduated pension.·
Increases for a dependent wife under 60 or a child.
Increments to all parts of the pension rise by 3.3 per cent. The extra for a dependent wife rises by 7.4 per cent but the increase for a dependent child is not rising at all.
So, for example, someone who gets a roughly average pension for a man of £94 made up of £67.50 basic pension, £3.91 graduated pension and £22.59 SERPS, will get a pension from April 9 of £72.50 + £4.04 + £23.34 = £99.87 – a rise of 6.2 per cent – rather than the £100.96 which would be a full rise of 7.4 per cent. This penny pinching, lopping more than £1 off this typical pension, will save the Government around £400 million.
February 2001 Amended April 2001
e-mail Paul Lewis on paul@paullewis.co.uk