10 years of work required to get new State Pension

Pensions Minister, Steve Webb, has confirmed a 10-year minimum qualifying period for the new single-tier State Pension.

We will need to build up at least 10 qualifying years of work in order to be eligible to receive the new single-tier State Pension, Work and Pensions Minister Steve Webb has confirmed.

In a ministerial statement put out ahead of the Pensions Bill Second Reading in the House of Lords, Webb said: "Putting in place the minimum qualifying period will help ensure that State Pension expenditure is targeted at individuals who have made a significant social or economic contribution."

The minimum qualifying period will apply to anyone that reaches the State Pension age on or after April 2016. Women born on or after 6th April 1953 and men born on or after 6th April 1951 will fall into this bracket.

'Qualifying years' can be accrued through National Insurance contributions or receiving National Insurance credits for things like caring for a child, caring for others or being too ill to work.

Under the new single-tier State Pension, those with 35 years of National Insurance contributions will be entitled to a full flat rate State Pension of approximately £144 per week in terms of today's prices.

Those with the minimum 10 qualifying years will receive a proportion of this benefit.

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Simplifying pensions

Back in January the Government confirmed plans for a new flat-rate single-tier State Pension to reform the complicated current system in the UK.

At the moment the basic State Pension pays up to £110.15 a week, depending on the number of years you’ve paid National Insurance contributions or received National Insurance credits. This can be topped up to £145.40 with pension credit, or you could qualify for a top up with the Second State Pension. You need to have 30 qualifying years to get the full amount, but those with at least one year get a proportion of the benefit.

The State Pension is protected by a triple lock system introduced by the Coalition in 2010, which the Chancellor confirmed in the Autumn Statement  will continue into 2014. The triple lock system means that the full basic State Pension rises in–line with either the consumer prices index, average earnings or 2.5% - whichever is highest.

So the £110.15 per week basic State Pension will rise by 2.7% from April 2014,  a cash rise of £2.95 a week. The standard minimum income guarantee in Pension Credit will also match the cash rise in the basic State Pension.

Under the new system a flat rate will exist and will pay up to approximately £144 a week in today’s money. Those with 35 years of contributions - an additional five years compared to at present - will get the full amount, while those with less will get a proportion of the benefit.

The self-employed, women and those on a low income are set to benefit most from the changes.

Self-employed people aren’t able to build up a Second State Pension to top up their basic State Pension, while women tend to take time out of work to care for children which means their contributions are usually smaller.

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Missing out

Higher earners are expected to lose out on the reforms as their income will be reduced to the flat rate of £144. And those with less than ten years’ NI contributions or credits won’t be entitled to anything.

But there are also those that have already reached State Pension age or are due to reach State Pension age before April 2016 that might have benefited from the reforms.

However, the Chancellor also announced in the Autumn Statement that the Government plans to introduce a scheme from October 2015 to allow current pensioners and those who reach State Pension age before the introduction of the new single-tier pension the option to top-up their Second State Pension through a new class (3A) of voluntary National Insurance contributions.

Future for State Pension age

The Government is also working to make the State Pension age rise in line with life expectancy so that on average we spend up to one third of our adult lives claiming the State Pension.

The State Pension age is likely to come forward to 68 by the mid-2030s and is likely to increase to 69 by the late-2040s.

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