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Pensions Act 2014

Section 1: State pensionSection 2: Entitlement to state pension at full or reduced rateSection 3: Full and reduced rates of state pension

44.These sections create a new benefit – referred to in the Act as “state pension”.

45.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 SSCBA 1992), in legislation these are referred to as “retirement pensions”. For ease of reference this commentary therefore refers to the new benefit as the “new state pension” and the current retirement pension as the “old retirement pension”.

46.Those reaching pensionable age on or after the start date for the new state pension will not be eligible for the old retirement pension. This start date is to be 6 April 2016. The old retirement pension arrangements will continue for people who reach pensionable age before 6 April 2016.

47.The full rate of the new state pension which will be applicable for the first year will be set by regulations prior to the start date of the new state pension. Thereafter, it will be up-rated each year (see paragraph 49). 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.

48.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).

49.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.

50.The provision for the new state pension to be up-rated (annual increases to the pension in payment) reflects that for old basic pension: the Secretary of State must increase the benefit by a percentage not less than the percentage annual increase in the general level of earnings (Schedule 12, paragraph 19).

51.These sections apply to people who do not have any qualifying years for tax years before the new state pension start date.

52.Transitional arrangements apply to those who have qualifying years for tax years before 6 April 2016 and who attain pensionable age after that date – see commentary on sections 4 and 5.

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