The new state pension: what’s in it for employers?

By Charles Cotton, CIPD Performance and Reward Adviser

The state pension changes on the 6th April and those that are entitled to it could get up to £155.65 per week, depending on their national insurance record.

Unlike the old state pension, the new state pension (NSP) is flat rate, so income will not depend on various benefit top-ups. Under the new system, this should mean that a worker who saves for their retirement will be better off than someone who doesn’t. For employers, this means that their workplace pension plan could become more attractive to their employees because they can see the value of remaining in the scheme and the worth of the employer contribution.

From an employer perspective, it makes sense to help employees understand what they can expect to get from the state and at what age because the state pension influences their decisions when and how to retire. Employers can help their employees’ financial well-being by directing them to the right sources of information.

While the NSP is designed to give people greater clarity about what pension they will get from the state in retirement, research indicates that those age 50 and over are unsure when they will become eligible for it and how much they can expect to receive.

Which workers are entitled to the NSP? They’ll be able to claim it if they reach State Pension age (SPA) on or after 6 April 2016. This applies to men born on or after 6 April 1951 and women born on or after 6 April 1953. If they were born before those dates they’ll be able to claim their State Pension under the old system. If staff want to know when they reach their SPA, employers can direct them here.

How much workers will get from their NSP will usually depend on their National Insurance record. This means those who have been contracted-out of the additional State Pension in the past and have been paying into a workplace pension instead will not receive the full amount.

However, in theory, these workers shouldn’t have missed out because they’ll receive additional income from their workplace pension (or pensions). Employees can find out if they’ve been contracted-out at and how this might affect their state pension.

In addition, employees may be able to boost their NSP by applying for National Insurance credits or paying voluntary National Insurance contributions

To help employees aged 50 and over work out what they can expect from the state, they can request a personalised NSP statement.

A pension is not only an important recruitment and retention tool, it can also help workers leave work in their old age. However, this will only work if employees are aware of what they can retire on and when, so these links should help them make informed decisions.

While it will involve some work, employers should think about how they can help their employees by letting know about the changes, such as through an email, a short statement on the company intranet, or an item in the employer newsletter. The government has created a resource pack for firms who want to let their staff know about the changes.

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