The Pensions Act 2007

The Pensions Act 2007 puts into law the reforms to the State Pension system set out in the White Paper, Security in retirement: towards a new pension system published in May 2006.

These reforms to the State Pensions system cover the basic State Pension and the additional State Pension (also known as the State Second Pension) and will change some of the qualifying conditions for both.

The Act only applies to Great Britain but it is intended that Northern Ireland, which has its own pensions legislation, has made corresponding provision for its customers in due course.

Key changes are set out below:

Basic State Pension

• from 6 April 2010 reducing the number of qualifying years needed to receive a full basic State Pension from generally 39 years for women and 44 years for men to 30 years for both men and women.
• linking annual cost of living increases in basic State Pension to earnings rather than prices (the coalition Government has committed to implementing this from April 2011 );
• changing the contribution conditions for basic State Pension so that it is easier for everyone to build up some entitlement;
• from 6 April 2010 replacing Home Responsibilities Protection (HRP) with a new system of weekly credits for parents and carers, for those getting Child Benefit for a child under 12 or caring for someone sick or disabled for 20 hours or more per week.

Additional State Pension

• from 6 April 2010 introducing national insurance credits for parents and carers so that they can build up some entitlement to the additional State Pension
• from April 2012 the option to contract out of the additional State Pension into a personal, stakeholder or defined contribution occupational pension will come to an end. People who are contracted out on a defined contribution basis at the abolition date will automatically be brought back into the state system and, depending on their earnings, may begin to build up entitlement to the additional State Pension.

State Pension Age

• Up to 5 April 2010 the State Pension age is 60 for women and 65 for men, but after this date women’s State Pension age will gradually rise until it reaches 65 in 2020
• Gradually increasing State Pension age, between 6 April 2024 and 5 April 2046 from age 65 to age 68 for both men and women to reflect increasing longevity in society and make the State Pension affordable in the long term

The Government is reviewing the current timetable for increasing the State Pension age. No decision has yet been made as to how this timetable will change. Any change would require the approval of Parliament.

Further information

You can download a copy of the Pensions Act 2007, the Explanatory Memorandum the Regulatory Impact Assessment and the Gender Impact Assessment.

There is further information for individuals about pensions on the Directgov website.

• Pensions and retirement planning (Directgov website)

There is further information for employers about pension on the Business Link website.

• Pension schemes (Business Link website)