WHEN Sir William Beveridge was MP for Berwick, he planned the introduction of a modern pension system, which was meant to be simple, based on National Insurance contributions, and with no “means test”.
He was continuing the work begun when Lloyd George introduced the first old age pension in 1908. But later governments tinkered with the scheme until it became the most complicated in Europe, with women and the self-employed getting a poor deal, and nearly half of all pensioners depending on means tested pension credits.
Steve Webb, the Liberal Democrat pensions minister, along with Conservative secretary of state Iain Duncan Smith, has presented a new scheme which goes back to first principles and has been hailed as the most radical reform since Beveridge.
How will it affect you? Here are answers to some of the questions.
When will it start?
Probably April 2017, for anyone retiring after that date.
How much will it be?
More than the present means tested figure of 142.70 a week, and, like existing pensions, it will be up-rated year by year in line the highest of earnings, prices or 2.5%.
Who will get it?
Everyone who reaches state retirement age and has paid National Insurance contributions for 35 years – if you have not paid for 35 years you will get a reduced amount, as long as you have contributed for 10 years.
What if I am already getting my pension?
You will carry on getting it, with the Coalition government’s guarantee that it will be up-rated every year by earnings, prices or 2.5%, whichever is the highest. That meant that last year pensioners got the biggest pension increase ever of 5.2%.
What if I hit retirement age before the new scheme starts?
Again, you will get the present pension, up-rated in the same way.
Why does it take 35 years of contributions to qualify for the full amount?
Because people are living so much longer, and there will be proportionately fewer people of working age paying into the pension to support those receiving it.
What if you are not able to work, because you are bringing up children at home?
You will be credited with contributions, as you are now through the Home Responsibilities Protection system. But it is important that you fill in a child benefit application – even if you do not qualify for the benefit, you will get the credits.
What about carers?
They will get contributions credited.
What if you are unemployed or unable to work because of illness or a disability? Again, you will be credited with contributions for as long as you qualify for the relevant benefits.
If there is a gap in my contribution record can I pay for extra contributions before I retire, and is it worth it?
Yes you can, subject to certain conditions, and it is worth checking into because it can be a very good deal.
What if you have paid in to the earnings-related scheme (SERPS) and are expecting to get more than the new pension (estimated at £144)?
You will get the extra amount – your pension will be whichever of the two is higher.
What if you are in a private pension scheme which is “contracted out”?
The contracting out system will end, but you will get the full benefit of everything you have paid in. But because you did not pay contributions while you were contracted out, you may get less than the full amount of the new state pension.
Should people in pension schemes at work or private schemes stop paying into them?
Definitely not – the new pension is intended to be a better minimum income in retirement than the present one, but for a comfortable retirement we need to save as well.
What about married women who rely on their husband’s contribution record?
That will change under the new system, and everyone’s pension will depend on their own record of paying in, but there will be arrangements to protect people who might lose out because of this in the early years.
Pension issues have always been quite a big part of my postbag from constituents, and I will be glad to help anyone at my regular surgeries, through post or e-mails, or through my constituency office in Alnwick.
On a historical note, I remember when I had not been MP for long and someone brought me a Liberal election poster from 1911. It had been found, carefully buried in a bottle, when some farm buildings were being demolished near Whittingham at that time. The poster was celebrating Lloyd George’s introduction of the five shilling pension, and all the workmen putting up the buildings had signed it on the back as a “thank you” to Lloyd George. They hoped it would be seen long after they had passed on, and it was.