Changes to state pension and national insurance from today (6th April 2016)
The Government is about to change the way state pensions are made up. Every pension is assessed individually, so the following is a simplified summary.
Currently, there are two elements of state pension provision. The first and lower tier is the basic state pension. All workers (including police officers) pay National Insurance Contributions towards the accrual of this benefit. It has been possible to be contracted out of the upper tier of state pension provision, previously known as State Earnings Related Pension Scheme (SERPS) and more recently known as S2P (State Second Pension).
All police officers have been contracted out up until this point but on 6 April 2016 the law is changing.
It will no longer be possible for any scheme and its members to be contracted-out. This change coincides with a further linked change from a two tier system to a single tier state pension which applies to anyone reaching state pension age on or after 6 April 2016.
Summary of the new single tier pension:
- The new single tier state pension will affect men born on or after 6 April 1951 and women born on or after 6 April 1953.
- The Qualifying Years required for a full pension will change from 30 years under the existing system to 35 years under the new system from 6 April 2016. The impact that this will have on serving and recently retired officers below SPA at that point will vary depending upon their individual circumstances.
Immediate impact on serving officers
National Insurance Contributions
Members of all the police schemes will be paying National Insurance Contributions at a rate 1.4% higher than they currently are, on earnings between the Lower Earnings Limit and the Upper Accrual Point (these are £155 and £770 per week for 2015/16).
This will affect the amount of take-home pay for all officers. We expect more information to be released by the Home Office in the lead up to the changes.
Impact on retirees
Where those reaching state pension age on or after 6 April 2016 (including police officers) have been members of contracted out-schemes, they have paid less than the full rate of National Insurance Contributions. So, the years of membership in police schemes will not count in full on a year for year basis towards what is now the 35 'Qualifying Year' period necessary to receive the new single tier state pension at its full rate.
PFEW has been asking for more information to be released for many months and we have written to the Home Office and copied Elizabeth France, Independent Chair of the Pension Scheme Advisory Board into the correspondence.
This is all the information we have at this time. We felt it was important that you knew of the changes and why they were being introduced. As soon as we have further information we will circulate it.
The Police Federation are not able to do individual calculations to work out what this means for individual members. The only people who have the information as to your contributions are the Department of Work and Pensions. See more information here: www.gov.uk/yourstatepension
Hampshire Police Federation