The Pensions Act 2007 has received Royal Assent, paving the way for personal accounts.
Peter Hain, secretary of state for work and pensions, said that fairer deals on state pensions under the Act will provide a platform for the government’s scheme of personal accounts which will be introduced in the next Pensions Bill. “For the first time, all employees will have access to a workplace pension with a minimum employer contribution, and a contribution from the government,” he said.
Under the Pensions Act 2007, the number of years’ contribution required to achieve a full basic state pension will be reduced to 30 years for both women and men from 6 April 2010. The current requirement is 39 years for women and 44 years for men. Where currently some women and carers do not get a full pension entitlement because their families and caring responsibilities mean they are not in work long enough to qualify, the change to legislation means that many women on a low income could receive an extra £50 a week by the 2050s from the state pension.
Hain said: “Around three-quarters of women retiring in 2010 will be entitled to a full basic state pension – compared with 35% now, and 50% without reform. More than 90% of women and men retiring in 2025 will be entitled to a full basic state pension.”
The Act will also raise the state pension age gradually to reflect the ageing nature of the population. The first increase from 65 to 66 years will take place between 2024 and 2026; the second increase from 66 to 67 years will occur between 2034 and 2036; and the third increase from 67 to 68 years will take place between 2044 and 2046.
The Act also re-links the basic state pension with earnings from 2012, or by the end of the next parliament, and provides for a simpler flat rate state second pension.