What does the Autumn Statement mean for pensions?

Chris Torney / 26 November 2015

As George Osborne announces that the new flat-rate state pension will be £155.65 a week, we look at how the Autumn Statement will affect pensions.



Please note: This is coverage of the Autumn Statement 2015. Click here to see Saga's coverage of the Budget 2016.

Chancellor George Osborne used his Autumn Statement to confirm next year’s rise in the state pension for current pensioners, as well as to reveal how much will be paid under the new system.

Osborne said that the basic state pension would increase from £115.95 to £119.30 a week on April 6, and added that the Government was maintaining its commitment to the “triple lock”, which guarantees that annual pension increases are always in line with inflation, earnings growth or 2.5% -- whichever is the highest.

New flat-rate pension amount confirmed

Anyone who reaches state pension age on or after April 6 next year will be part of a new system. Instead of the current, complicated arrangement, which sees people receive a basic pension, as well as potential extra payments based on National Insurance contributions, the new scheme will pay a single flat rate. 

Osborne has now announced that this will be £155.65 a week in the first year.

Read Paul Lewis' guide to boosting your pension.

Not everyone will get the full state pension amount

However, there has been much controversy recently over the fact that many of the people who will get their pensions under the new scheme may not be entitled to this full amount.

In some cases, for example, an individual’s entitlement could be significantly reduced if they have at any point “contracted out” of the state pension and had National Insurance contributions diverted into their own personal or occupational pensions.

Campaigners say that many of those who are on the cusp of retirement have not been made adequately aware of the ins and outs of the new system.

Will you get the full state pension?

More help needed to understand the new system

Gareth Shaw, head of consumer affairs at Saga Investment Services, said: "The state pension is the bedrock for financial planning for retirement. The government must do more to explain how next year’s single-tier system will work.

"The current system is horribly complicated, and the new single-tier will eventually wave away this complexity. But next year’s generation of state pensioners need more help understanding what they’re entitled to.”

Shaw added that a third of those over 50 had no idea whether they would be better off or worse under the new state pension. At the same time, just 7% know how to boost their pension before they finally claim it.

“The government must do more to help the over-50s properly plan for retirement," he said.

New state pension changes cause misery and confusion.

Changes to pension credit

Meanwhile, Osborne announced that anyone who claims pension credit, a means-tested benefit for those on low pensioner incomes, will have their payments stopped if they are out of the UK for more than four weeks.

This replaces the current upper limit of 13 weeks, and also applies to housing-benefit claimants.

The Chancellor said: “The benefit system should not subsidise those on benefits to go abroad for extended periods.”

Read our Autumn Statement round-up here. 

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.