Updated 3 October 2012
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)
Factsheets
This section contains some of the factsheets the Department published in relation to the 2007 Act.
| Name | Summary |
|---|---|
Projections of entitlement to Income Related Benefits to 2050 (97KB)  |
This factsheet presents updated projections of entitlement to Pension Credit and new projections of entitlement to Housing Benefit, Council Tax Benefit and any income related benefit under the reformed state pension system. It also describes the possible interaction between private pensions, after reform and entitlement to the income related benefits. |
| Pensions Reform factsheet (561KB) |
This factsheet sets out revised projections of spending on pension benefits, and estimates of pension income in the future under pension reform which were correct at the time of publication in 2007. The revised figures take into account a number of changes including new economic assumptions, minor improvements in modelling, and they present the figures in 2007/8 prices and earnings terms. |
| Making the State Pension fairer and more widely available (33KB) |
This factsheet describes the Government's proposals for addressing the gaps in State Pension coverage, including reducing the number of qualifying years and was correct at the time of publication in 2006. |
| People benefiting from private pension reform: explanation of participation estimates – November 2007 (156KB) |
This factsheet presents analysis on the impact of the introduction of automatic enrolment, minimum employer contributions and the new personal accounts scheme on the number of people saving in a workplace pension scheme. It sets out current working assumptions on pension participation following the reforms, and explains how this analysis has evolved since that presented in the May and December 2006 Regulatory Impact Assessments. |
| People benefiting from private pension reform: explanation of participation estimates – September 2009 (60KB) |
This factsheet presents updated analysis on the impact of the introduction of automatic enrolment, minimum employer contributions and the new personal accounts scheme on the number of people saving in a workplace pension scheme. It sets out current working assumptions on pension participation following the reforms, and explains how this analysis has evolved since that presented in the factsheet published in November 2007. |
Briefing pack for advisers
DWP produced a range of materials to help partner organisations and advisers understand the changes to State Pensions that came into effect on 6 April 2010. The links to these materials are below.
Protecting the value of the basic State Pension
The basic State Pension is usually increased each year to protect its value and ensure it will buy roughly the same in future as it does now. At the moment, the basic State Pension is usually increased annually, by prices. However, the Government has announced that from April 2011 the basic State Pension will be increased every year by the highest of the growth in average earnings, prices, or 2.5% (a ‘triple guarantee’). This only applies to the basic State Pension. Annual increases are not paid to people who get a UK State Pension and who live in certain countries overseas.
Pensions are changing – a resource pack for partner organisations and advisers
DWP has developed a pack below which aims to support any adviser whose customers wish to understand the State Pension reforms and how they may be affected by changes that came into effect on 6 April 2010.
- State Pensions Reform briefing pack for advisers (744KB) – updated February 2010
Communicating pensions information to customers – a resource pack for partner organisations and advisers
DWP has developed a resource pack to support partner organisations and advisers whose customers wish to understand their State Pension and get help with planning for retirement. Updated in November 2010, the pack includes eight fact sheets covering:
- general information about the State Pension and the simple steps that people can take now to boost their income in later life
- guidance for carers who provide unpaid care for 20 hours or more a week and could get Carers Credit
- guidance for people who are thinking about divorce or separation or who have divorced/separated
- guidance for people planning to move overseas
You can access and download individual fact sheets from the list below.
- Introduction to your State Pension (45KB)
- If you do unpaid care work, take care of your pension by claiming Carers Credit (35KB)
- Suki's story (27KB)
- Don't let divorce dampen your retirement plans (31KB)
- Sunita's story (25KB)
- Children flown the nest? (39KB)
- Martin and Sarah's story (62KB)
- Important State Pension information for UK ex-pats (39KB)
Welsh versions
- Introduction to your State Pension – Welsh (114KB)
- If you do unpaid care work, take care of your pension by claiming Carers Credit – Welsh (50KB)
- Suki's story – Welsh (72KB)
- Don't let divorce dampen your retirement plans – Welsh (84KB)
- Sunita's story – Welsh (69KB)
- Children flown the nest? – Welsh (96KB)
- Martin and Sarah's story – Welsh (95KB)
- Important State Pension information for UK ex-pats – Welsh (94KB)
Background to Reform
This section covers the key events that led up to the Pensions Act 2007 and provides background information on the consultations and decisions that shaped the governments policy.
The Independent Pensions Commission
In December 2002 the Government set up the independent Pensions Commission to review the longer-term challenges faced by the pensions system and make recommendations for reform.
The Commission published its conclusions in November 2005, setting out its proposals for meeting the challenges we face in providing a fair and adequate retirement income for all in retirement.
You can view the first, second and final commission reports and find out about the commissioners at the Pensions Commission website.
The National Pensions Debate
With the independent Pensions Commission report providing a solid basis for building consensus, the Government launched the National Pensions Debate to give the public their chance to have their say on the emerging options for reform. This process culminated in National Pensions Day – the biggest deliberative consultation event to date in the UK.
It was vital that the changes Government made produced a lasting solution and people were asked what they thought so that decisions were made that everyone could have confidence in. Focusing on the broad package of reforms put forward by the independent Pensions Commission, the National Pensions Debate gathered the views of thousands of people through public events, an online Debate and via stakeholder events. These views played an important role in helping to inform the next stage of the reform process, the Government’s White Paper on Pensions Reform, Security in retirement: towards a new pensions system.
Results from the Debate – What You Said
The Final report (1.04MB) on the National Pensions Debate summarises the outome of national debate, which concluded at the end of March 2006 and featured the National Pensions Day, the largest event of its kind ever undertaken in the UK. The Debate had thousands of people taking part in an online survey and the National Pensions Day included over 1000 members of the public taking part in simultaneous, satellite-linked events spanning six locations.
This comprehensive report provides analysis of the voting results from all 6 locations. as well as results of the online Debate.
National Pensions Day – 18 March 2006
To find out more about National Pensions Day events in Belfast, Birmingham, Glasgow, London, Newcastle and Swansea, you can read the End of Day report (78KB) with findings from the events.
Two White Papers
Security in retirement: towards a new pensions system
With input from the National Pensions Debate, the Government built on the Commission’s report and published its own proposals on the 25 May 2006 in the White Paper Security in retirement: towards a new pension system (1.58MB) . These proposals were designed to meet the five tests of personal responsibility, fairness, simplicity, affordability and sustainability.
Consultation response
Between May and September 2006, the Government consulted on the reform package in the White Paper. Around 350 individuals and organisations responded to the consultation.
The Government published a summary of the responses and its proposals for moving forward (607KB) on 30 October 2006.
The Government also published its response to the Work and Pensions Select Committee report on Pension Reform (443KB) on the same day.
You can also read the written ministerial statement to parliament (19KB) and the press release
Personal Accounts: a new way to save
On 12 December 2006, the Government published a second White Paper, Personal Accounts: a new way to save (2.97MB) This White Paper set out proposals for a new national system of low cost personal accounts.
Consultation response
The publication of the White Paper was followed by a period of public consultation which closed on 20 March 2007. The Government published its response to the consultation on 14 June 2007.
The Government also published its response to the Work and Pensions Select Committee report on the Personal Accounts White Paper (224KB) on the same day.
You can also read the written ministerial statement to parliament (19KB) and the press release.
