Current Students and Staff

// University News

29 Feb 2016

The new State Pension: how the changes might affect your monthly salary

The changes to the State Pension

On 6 April 2016, the Government is introducing a simpler, fairer State Pension system, which will give people a clearer idea about what pension the state will provide, making it easier to plan retirement savings.

You’ll be able to get the new State Pension if you are eligible and are

  • a man born on or after 6 April 1951
  • a woman born on or after 6 April 1953

If you reach State Pension age before 6 April 2016, you’ll get the State Pension under the current scheme instead.

Further information about the new State Pension is available on the Government website

How might this affect me?

The introduction of the new State Pension could mean that you have to pay more in National Insurance contributions.

The current State Pension is made up of two parts: the Basic State Pension and the Additional State Pension (sometimes called the State Second Pension or SERPS).

The pension schemes offered through the University – Universities Superannuation Scheme (USS) or Local Government Pension Scheme (LGPS) – are ‘contracted-out’ of the Additional State Pension. This means that you, and the University, will have been paying National Insurance contributions at a lower rate because you get a National Insurance rebate. You may therefore have little or no Additional State Pension as you are building up a workplace pension instead.

From 6 April 2016, when the new State Pension replaces the current Basic and Additional State Pensions, USS and LGPS will no longer be ‘contracted-out’. This means that members of USS and LGPS will no longer get the National Insurance rebate and will start paying the standard rate of National Insurance contributions. The University will also pay higher contributions.

Further information about ‘contracting out’ is available on the Government website.

If you are not a member of USS or LGPS your National Insurance contributions will not be affected.

How much more might I have to pay?

If you are a member of USS or LGPS, your National Insurance contributions will rise by 1.4% on your earnings between the Lower Earnings Limit and the Upper Accrual Point; in 2015-16 this is earnings between £486 and £3,337 per month.

Further information about the National Insurance thresholds and rates for 2015-16 is available on the Government website.

Further information about the changes is available in the Q&A document produced by the Universities and Colleges Employers Association (UCEA).