Section 1: State pensionSection 2: Entitlement to state pension at full or reduced rateSection 3: Full and reduced rates of state pension
These sections create a benefit – referred to in the Act as “state pension”.
Although the term “state pension” has been commonly used to refer to Category A to Category D contributory and non-contributory pensions paid since the 1970s (and now payable under the Contributions and Benefits Act) in current legislation these are referred to as “retirement pensions”.
Those reaching pensionable age on or after the start date for the new state pension will not be eligible for the current retirement pension scheme. This start date is to be 6th April 2016. The current pension arrangements will continue for people who reach pensionable age before 6th April 2016.
The full rate of the new state pension which will be applicable for the first year will be set by regulations prior to the commencement of these sections. Thereafter, it will be up-rated each year. The basic conditions of entitlement for the new state pension at the full rate will be:
that the person has attained pensionable age; and
that the person has 35 or more ‘qualifying years’ of National Insurance contributions.
Where an individual has fewer than 35 qualifying years, his or her entitlement will be pro-rated and each qualifying year of National Insurance contributions will entitle him or her to one 35th of the full rate (section 3).
However, section 2 also sets out that entitlement will be subject to a minimum number of qualifying years, which will be specified in regulations but will be no more than ten years.
The Pensions Act 2014 contains provisions for the new state pension to be up-rated. The Secretary of State must increase the benefit by a percentage not less than the percentage annual increase in the general level of earnings. Whenever the Secretary of State makes such an order, the Department may make a corresponding order for Northern Ireland.
These sections apply to people who do not have any qualifying years for tax years before the new state pension start date.
Transitional arrangements apply to those who have qualifying years for tax years before 6th April 2016 and who attain pensionable age after that date– see commentary on sections 4 and 5.