This piece first appeared in Saga Magazine in May 2008
The text here may not be identical to the published text

Big change in state pensions

The state pension was born one hundred years ago this year. And it is about to undergo its biggest reform for sixty years. The changes will apply to anyone who reaches pension age on 6 April 2010 or later – men born on 6 April 1945 or later and women born on 6 April 1950 or later. Most of the changes mean more money for that lucky post-war generation. But people born before those dates are not affected. They will always be subject to the old rules and their pension will not be improved.

Contributions
Anyone who reaches pension age from 6 April 2010 will need fewer contributions to get a full state pension. At the moment men need 44 years contributions or credits and women need 39. That is roughly 90% of a full working life from 16 to pension age. But from 6 April 2010 both sexes will need just 30 years to get a full pension.

Anyone with less than the full amount gets a pro rata pension. So at the moment a woman with 20 years will get 20/39ths pension which is rounded up to a 52% pension. A man with 20 years will get 20/44ths or 46% of the full pension. Anyone with less than a 25% pension currently gets nothing. So women who have paid only nine years and men who have paid ten get no pension at all.

Those who reach pension age from 6 April 2010 will be treated more generously and get a pro rata pension however few contributions they have paid. Someone with 20 years will get a two thirds pension, someone with 15 years a 50% pension. Because there will be no minimum someone with three years will get a 10% pension and someone with just one year will get 1/30^th of the full pension.

Caring
The contribution rules will become more generous to people who have spent some of their working lives bringing up children or caring for disabled adults. At the moment a complex system called ‘home responsibilities protection’ or HRP means that a parent can deduct one year from the 39 or 44 needed to get a full pension for each year they receive child benefit for a child under 16. Only the parent who gets the child benefit – normally the mother – can do this. A similar system applies to carers who spend at least 35 hours caring for a severely disabled person but who do not get carer’s allowance and the contribution credit that come with it. HRP only began in 1978 and any time spent caring or bringing up children before that does not count.

That complex system is being replaced for anyone who reaches pension age from 6 April 2010. They will get a contribution credit for each week they claim child benefit for a child under the age of 12 or care for a severely disabled person for at least 20 hours a week. Years of HRP counted between 1978 and 2010 will be converted to years of contributions. The change should mean higher pensions for mothers (and some fathers) and for many carers especially those who care for less than 35 hours a week or do not get carer’s allowance.

Cuts
At the moment a male pensioner can claim an extra Ł54.35 a week added to their pension for a wife under 60 as long as her weekly income from earnings or a pension of her own is below Ł60.50. But no new claims will be allowed from 6 April 2010 and any dependant’s additions which are still being paid in April 2020 will be stopped.

Under the present rules men who reach 60 but do not work can get a contribution credited for each year until they are 65. They will be phased out and from 6 April 2010 men will only get auto-credits from women’s pension age until 65. Once women’s pension age hits 65 in April 2020 they will disappear altogether.

Unfair
Which side of the 2010 cliff edge you fall depends on your date of birth not when you claim your pension. So if your 60^th or 65^th birthday is before 6 April 2010 you cannot gain entitlement under the new rules by deferring your claim. If you claim after 6 April 2010 you will still be subject to the old rules. There will be neighbours or friends with identical work records one just before 6 April 1950 (or 1945 for men) and one born after who will get very different pensions. There may even be twins one born on April 5^th just before midnight and one born minutes later on April 6^th who will fall into the two different regimes. The Government announced just before Christmas that it would not do anything about this problem which it believes is too complex and too expensive to resolve. However, Saga Magazine has learned that the House of Lords will attempt to force a change in the summer.

Another unfairness will also become very apparent under the new regime. Many people will have paid enough contributions to get a full pension long before they reach pension age. But if they are in work National Insurance contributions will still have to be paid. For example someone born in 1956 who starts work at the age of 18 will have paid enough contributions to get a 100% state pension by the time they are 48. But if they work until 65 they will have to carry on paying National Insurance contributions for another 17 years until they reach 65. National Insurance contributions do not have to be paid once you reach pension age.

Raising pension age
The other side of the changes it that many people will in future have to wait more years before they get their state pension at all. That is because we are all living longer. Life expectancy is growing by about three months for every year that passes. Actuaries now say that these increases will not come to an end in the foreseeable future. The longer we live the more it costs to pay a pension for life. So state pension age will rise slowly from 6 April 2010 until it eventually reaches 68 for those born on 6 April 1978 and later.

Ladies first The change begins with women. Pension age for women born between 6 April 1950 and 5 April 1955 will rise from 60 to 65 in stages. Women whose 60^th birthday is in the month 6 April 2010 to 5 May 2010 will all reach pension age on 6 May 2010. Women who reach pension age from 6 May 2010 to 5 June 2010 will reach pension age on 6 July 2010. After that for each month that passes pension age will rise by two months, always falling on the 6^th of odd numbered months. The process will end with women who reach 60 between 6 March 2015 and 5 April 2015 whose pension age will be almost five years later on 6 March 2020. Once that phasing in has finished pension age for men and women will be their 65^th birthday.

Altogether now Men and women born from 6 April 1955 to 5 April 1959 will reach pension age at 65. Then the age will be gradually raised for everyone to 66 where it will stay for those born 6 April 1960 to 5 April 1968. Two further rises will push it up to 67 from April 2036 and to 68 from April 2046. You can find your pension age by entering your date of birth at www.thepensionservice.gov.uk/resourcecentre/statepensioncalc.asp or table 1 in Pensions for Women which can be downloaded here www.thepensionservice.gov.uk/pdf/pm/pm6feb08.pdf. Most of the changes described apply to men as well.

The minimum age for getting pension credit and winter fuel payment is currently 60 for men and women. But the qualifying age for both will rise with women’s pension age. So men will only be able to get either if they have reached the pension age for women when they claim.

Raising pension age saves the Government money in two ways. First it pays pensions to fewer people each year and for a shorter time. Second, it is collecting National Insurance contributions for longer from those in work. Not that it needs the money. By 2010 the National Insurance fund will have a surplus of more than the cost of paying pensions and other benefits for a whole year.

State pension age for men and women
Born		State pension age	Reach state pension age**
Women only (men’s pension age = 65 until 5 April 2020)
Up to	5 April 1950	60	60^th birthday up to 5 April 2010
6 April 1950	5 April 1951	60–61	Between 6 May 2010 and 6 March 2012*
6 April 1951	5 April 1952	61–62	Between 6 May 2012 and 6 March 2014*
6 April 1952	5 April 1953	62–63	Between 6 May 2014 and 6 March 2016*
6 April 1953	5 April 1954	63–64	Between 6 May 2016 and 6 March 2018*
6 April 1954	5 April 1955	64–65	Between 6 May 2018 and 6 March 2020*
Men and women
6 April 1955	5 April 1959	65	65^th birthday between 6 April 2020 and 5 April 2024
6 April 1959	5 April 1960	65–66	Between 6 May 2024 and 6 March 2026*
6 April 1960	5 April 1968	66	66^th birthday between 6 April 2026 and 5 April 2034
6 April 1968	5 April 1969	66–67	Between 6 May 2034 and 6 March 2036*
6 April 1969	5 April 1977	67	67^th birthday between 6 April 2036 and 5 April 2044
6 April 1977	5 April 1978	67–68	Between 6 May 2044 and 6 March 2046*
6 April 1978	And later	68	68^th birthday on 6 April 2046 or later
During the transition periods state pension age is reached on the 6^th of odd-numbered months. *The pension is actually paid from the first Monday on or after state pension age For your own state pension age enter your date of birth at www.thepensionservice.gov.uk/resourcecentre/statepensioncalc.asp