The UK state pension is a benefit that plays a key part in retirement income for UK pensioners. Take-up is practically universal.

At the moment, two systems are running concurrently – the old two-tier system and for those retiring after 6 April 2016 the ‘new’ single-tier system. Comparing the old and new pensions, it is clear there is a widening difference that was not originally intended.

Many people who retired under the old system see people in the new system as better off – but it isn’t always clear cut. The cut-off date for the former state pension was 6 April 2016 for women born before 1953 and men before 1951. The basic state pension pre-2016 was very complicated, comprising the basic state pension and additional pension.

This was built up from National Insurance contributions and credits (from child benefit or other benefits). It also includes Guaranteed Minimum Pension (GMP) increases built up in employment.

This has two rates – pre and post 1997. Members often contact CSPA when their civil service pension increase doesn’t look right. This is because the GMP increases are paid in the state pension and therefore don’t increase in the civil service pension.

It has the outdated concept of married women possibly building up a pension based on their husband’s working life. Married women until 1977 could pay ‘a married women’s stamp’ – reduced NI – which meant they would have benefits based on their husband’s NI. There was simply too much complexity. It was difficult to work out how much pension would ultimately be available on retirement for any individual.

Contributions differed between those employed where there was a good occupational pension – such as in the public service, which paid reduced NI ‘contracted out’ of the State Earnings Related Pension Scheme (SERPS) or state second pension – and those who ‘contracted in’ and paid higher NI where they had no or poor occupational pensions.

The old pension was paid at age 60 for women and 65 for men. At its lowest this was £93 per week but could be topped up by means-tested pension credit to £201.05 per week or £306.85 for couples.

Originally, the upper limit of pension plus pension credit (a means-tested benefit that can enable other benefits) was set at five pence a week lower than the new state pension to prevent those on the new system claiming pension credit. But due to different indexation, this gap has grown. 

Single-tier pension
The newer single-tier state pension simplified things, making it easier to work out how much pension an individual can claim. The full credit is 35 years of work or credits with 10 years minimum. It is based on the individual record and there is no widow’s/widower’s pension.

However, although it is simpler and slightly more generous than pension plus pension credit at £203 per week, the age at which it is payable is 66 years and will increase to 67 in April 2028.

People will also miss out on the other benefits enabled by pension credits, such as council tax reductions and dental and optician help.

Pension credit is claimed by 1.4 million pensioners but there are still an estimated 850,000 eligible who don’t claim, leaving many pensioners in poverty. Shame and misunderstanding are among the factors hindering takeup.

The government is launching a mailout encouraging people to see if they can claim. If you think you might be eligible call 0800 99 1234 or check the online calculator at www.gov.uk/pension-credit-calculator
The biggest problem with both the two-tier and the post-2016 pension is that they
simply aren’t enough to live on.

Women in particular have been, and continue to be, badly let down by the pensions system and there is a significant disparity between the income of women pensioners and the income of men.

This is due in part to breaks in employment for caring responsibilities, low paid jobs that may be below the National Insurance level or long periods of part-time working. We must continue to campaign alongside colleagues in organisations such as the National Pensioners Convention for change and improvements to state pensions for all.