The State Pension
The State Pension is a promise that the Government makes, for the moment, to pay something, at some point, under some conditions, to some people, now and in the future.
There are NO rights; there is no contract. The money to pay pensioners in the current year is taken from current Government income. (i.e. there is not any formal and separate "Pension Fund").
A future Government could stop the pension or change the rules. They have done so in the past, and they could do so in the future.
This makes planning difficult as assumptions have to be made about what sort of State Pension there might be when you retire. We think it best practice to assume that the State Package (however put together) will probably provide a pension set around the level at which significant Social Security benefits would kick in.
Our reasoning is as follows – generous pensions are expensive and probably not affordable by the Government, but nor do people like to think of pensioners living in poverty. This means that both very high, and very low, pensions will probably always be politically unacceptable, and therefore not happen.
For further information see the DWP website http://www.dwp.gov.uk/. Please note that by clicking on this link you will be leaving our regulated website, and we do not take responsibility for the accuracy of the linked website.
Last updated on April 7, 2010