A single-tier pension: what does it really mean? - The Institute For ...

Current state pension system
Since S2P is set to become flat-rate, in the long run the third of the differences
listed above will disappear, leaving only really three differences between the BSP
and S2P components that prevent the current state pension system from
becoming de facto single-tier. New accruals will become flat-rate from about
2030, although the first cohort to experience entirely flat-rate accrual will not
reach SPA until around 2082.
When considering the impact of the proposed new system, it is important to bear
in mind that, even in the absence of the reforms proposed by the White Paper, the
current state pension system will evolve into a near single-tier pension with
extensive crediting for periods of unpaid activity. The long-run implications of
the proposed pension reforms should be discussed relative to this baseline.
2.2 Historic pension legislation and its continuing
implications
The differences between the proposed pension system and the current system
have been overstated in some of the public debate, largely because of a short-run
focus on how the accrued pension rights of those currently close to the SPA
would change under the new system. These individuals’ rights are significantly
affected by old legislation. In this section, we describe briefly the important
aspects of historic pension legislation that still affect working individuals’ future
state pension incomes. 13 These factors are important for the groups considered
in Chapter 4.
Basic state pension
The BSP was first introduced in 1948. Changes over time since then have affected
what activities are credited towards the BSP, how many years of contributions or
credits are required to achieve the maximum BSP entitlement, and how the level
of the BSP changes over time. In order to make comparisons between the pension
entitlements of current working-age individuals under the existing and proposed
state pension systems, it is only important to understand the first of these.
Until 1975, individuals had to be making flat-rate NI contributions to accrue an
entitlement to the BSP. Under various conditions, one could earn credits for
unemployment and incapacity for work, and over time the range of activities for
which one can earn credits has expanded; the most important of these changes
are summarised in Table 2.3 later. From 1978, anyone who was caring for a child
aged under 16 was afforded ‘home responsibilities protection’ (HRP). 14 For those
13 We do not discuss here any features of previous pension legislation that do not affect the
entitlements of people who are yet to reach the SPA. For a fuller description of the history of the
UK state pension system, see Bozio, Crawford and Tetlow (2010).
14
The individual had to be in receipt of child benefit for a child aged under 16 (or under 18 if the
child was still in full-time education).
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