Part 4: The New State
Pension Scheme
A new pension scheme starts in April 1978. Under the new scheme, retirement, widows' and invalidity pensions will, from April 1979, be in two parts:
a basic pension equivalent to the present flat-rate pension; and an additional pension related to earnings.
Employees who are members of an occupational pension scheme, which meets the necessary requirements, may be contracted-out of the additional pension for retirement and half the additional pension for widowhood. A contracted-out occupational pension scheme assumes responsibility for providing that part of the additional pension. The State scheme will provide the whole of any invalidity pension, basic and any balance of additional widows' benefits, and any basic retirement pension. It will also continue its present cover for sickness, unemployment, maternity and industrial injuries benefits.
The additional pension will be related to earnings between lower and upper earnings limits for contribution liability. These limits are reviewed annually and, from April 1978, are expected to be £17.50 (which is the basic pension rate) and about 7 times that amount. Additional pension will be calculated as 1/80th of these earnings for each year of contributions to the scheme up to a maximum of 1/4 (20/80ths) of these earnings after 20 years of contributions.
It will thus take 20 years for the full amounts of additional pension to build up but people who retire, are widowed or become entitled to invalidity benefit before then will benefit proportionately (even when, for retirement pension, widowed mother's allowance or widow's pension, they do not satisfy the contribution conditions for the flat-rate benefit).
Those who contribute for more than 20 years will have their additional pension calculated by reference to their best 20 years of earnings. Women will get the same personal benefit as men with the same earnings. A widow will get any additional pension earned by her husband with her widowed mother's allowance or widow's pension. A widow retirement pensioner will be able to add together the entitlements on her own and her husband's contributions up to the maximum that one person could have earned.
A man whose wife dies when they are both over State pension age will also be able to inherit his wife's pension rights, in the same way as a widow.
Certain people who have recently been widowed may be able to use their late spouse's earnings record for invalidity pension if this gives a more favourable result than their own.
Basic pension rights will be protected without the need to pay contributions for tax years during which a person cannot work because of home responsibilities, such as bringing up children (to age 16) or caring for a person receiving an attendance allowance. Women will not benefit from this provision, however, for years in which they keep the right to pay reduced contributions.
39
Page 135Page 136