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Managing my investments
Managing my investments

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5.1.3 The new flat-rate state pension

From April 2016, for those new to attaining the state pension age (SPA) the state basic and additional pensions have been replaced by a single flat-rate pension (for 2023/24 of £203.85 per week).

For 2023/24, the UK government’s assessment of the minimum weekly income required by pensioners was £201.05 for a single person and £306.85 for a couple (whether married or not) (Age UK, 2023).

This contrasts with the situation in the mid-1980s, when the basic state pension was about the same as the minimum level of income that was deemed enough for a single householder to live on. Therefore, anyone relying solely on the basic state pension is now also eligible to claim a means-tested top-up.

Such means-tested retirement benefits can discourage saving for retirement because building up a small private pension simply reduces the amount of benefits that can be claimed. The change to a flat-rate pension from April 2016 was intended to ensure that the state pension no longer falls short of the minimum income required. As a result, far fewer pensioners will need to claim means-tested benefits and there will be no disincentive to saving for retirement.

The rules relating to UK state pensions, the new flat-rate state pension and the impact on both of our record of National Insurance Contributions (NICs) are quite complex. To help you through the maze, watch this video, in which Martin and his Open University colleague, Jonquil Lowe, talk about UK state pensions and the 2016 changes.

The video was filmed in 2015. However, the issues explored remain relevant to retirement planning.

Download this video clip.Video player: ou_futurelearn_mmi_vid_1187_2.mp4
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