Flat-Rate State Pension

08 December 2016

The new single-tier, flat rate State pension

The flat-rate State pension replaced the current basic State pension and the State Second Pension (S2P, formerly known as SERPS) for anyone who reached State Pension Age on or after 6 April 2016.

The new pension is set at £155.65 per week and will increase in line with average earnings. It is an individual entitlement, so there are no special rules for people who are married, bereaved or divorced.

Transitional provision will protect the existing entitlement of those reaching State pension age after 2016. National insurance records will establish a ‘foundation amount’ with a deduction being made for any period a person was contracted out.

Entitlement is underpinned by the total State pension due under the previous system. If your foundation amount is less than the flat-rate State pension you will be able to build up further entitlement in following years. If your foundation amount is higher than the new level of flat-rate State pension, the excess will be protected and increased during the period up to your State pension age.

Anyone who has paid national insurance contributions for less than 10 years will not receive the flat-rate State pension, and people will need to have paid national insurance for at least 35 years to receive the full amount. However, a means tested minimum guarantee will still apply.


Many schemes, including the C & J Clark Pension Fund (the Fund), take account of the state pension in their design. Members of the C & J Clark Pension Fund have a deduction from their salary when calculating their Pensionable Pay, equal to the single person’s Basic State Pension (BSP). (This deduction is prorated for part time members). The NET Pensionable Pay is used to calculate both contributions and benefits.

In addition, for some members who joined the Fund prior to April 1988, a “bridging pension” (where a higher amount can be paid to a members normal retirement date, reducing thereafter) is also calculated by reference to the BSP deduction.

As the new flat-rate State pension is set at a higher level than the previous BSP, there would be a detrimental effect on benefits if it were to replace the current deduction from salary when calculating a member’s Pensionable Pay and benefits.

The BSP will continue to exist for those reaching State Pension Age before 6 April 2016, and the Government has confirmed it will continue to publish orders to update this. Therefore the Fund will continue to use the annual BSP for a single person as the State Pension Offset, as published annual by the Government.

The Clarks Flexible Pension Scheme is not impacted in any way by the introduction of the new flat-rate State pension.


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© Clarks Pensions 2014