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George Osborne Announces Changes to the Basic State Pension
The State pension currently consists of two elements:
The Basic State Pension (currently £102.15 a week
for a single person or £163.45 for a married couple)
and an earnings-related top up, known as the State
Second Pension (S2P). In his Budget speech on
23 March 2011 the Chancellor announced his intention
to replace the Basic State Pension and S2P with a
flat-rate State pension of £140 a week to make it
simpler to pay to pensioners and easier for people to
understand. The change is unlikely to happen for a few
years and won’t affect those who are already receiving
their State pension. Some people will be worse off as a
result of this change and others may be better off.
The Government is also considering changing the way
State pensions are paid for, with a proposal to combine
income tax and National Insurance into a single tax.
23 March 2011 – 2:35:00
C
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Annual Allowance
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The Annual Allowance has reduced
to £50,000 per year. This is the
maximum amount of tax-efficient
savings you can pay into all personal
pension schemes in one year.
More information was included in the
2011 edition of FYI Lite, available to
your responsibility to check that you
do not exceed this allowance. If, in
any year, you believe you may be
impacted by the Annual Allowance
you should contact the BAT Pensions
Administration Team.
Annuity Purchase
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You no longer have to buy an ‘annuity’
(a pension from an insurance
company) by age 75. You can leave
your pension invested as long as
you want.
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Pensions Retirement
Comments (and responses)
State pensions are harder to understand than the BAT pension. I do have a rough idea of the level of State
Pension I’m going to get, but only because I used to be Member-nominated Trustee of the ATC Scheme.
Hopefully this change will simplify things.
Fiona Charge, employee member of the DB Section
I don’t really understand the relationship between the BAT Fund and the State, I think about them quite
separately, although I think that I paid lower National Insurance and so won’t receive the earnings-related
top up to the State Scheme. What would this mean for me?
Mary Blunt, deferred member of the DB Section
The relationship between the State pension and your Company pension differs depending on the Section of the
Fund you belong to. Some members have paid lower National Insurance as the Fund replaces some of their State
Pension benefits. How the new flat rate pension may be adjusted to reflect this is still unclear but we will keep you
up-to-date on the Government’s thinking through FYI and FYI Lite.
The Government proposals should make the State pension more transparent, flexible and straightforward,
which is good, but it does worry me that the Government has reduced the allowances for tax-free non-State
pension savings. As a DB member it is very difficult to work out whether you are going to hit these allowances
without becoming liable for more tax.
Andrew Brock, employee member of the DB Section
The allowances are set high enough not to affect most people. However, working out if you might exceed these
allowances can be complicated. More information was included in the 2011 edition of FYI Lite, available to
download from
In addition, we are pleased to announce that you will shortly
be able to access an Annual Allowance calculator from the Fund website and will be updating members as soon
as this is available. In the meantime, if you have concerns or would like help with understanding whether you are
affected by the Annual or Lifetime Allowance, you should contact the BAT Pensions Administration Team.
My Normal Retirement Age is 60. Will I still be able to take my pension from the BAT UK Pension Fund at the age
of 60, although the State retirement age is increasing? And, if I do remain employed beyond Normal Retirement
Age, will employer contributions to my pension continue until I choose to retire and take my pension?
Denise Dillworth, employee member of the DC Section
The answer to both questions is yes. The age at which you can take your Company pension is not tied into the age
at which you start to receive your State pension. And the Company will continue to pay towards the pensions of
employees who remain employed after their Normal Retirement Age.
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