The Chancellor has announced today that the government will bring forward by one year the implementation of the single tier state pension, from 2016 rather than 2017.

The single tier state pension will increase the average state pension for women from 75 percent of the average state pension for men, up to 80 percent, increasing thereafter and reaching parity around 2040. They will receive an average of an extra £9 a week (based in the original 2017 implementation date) over the first ten years following implementation. Around 740,000 people will hit age 66 in 2016. Impact on final salary schemes. There are around 3,290 contracted out final salary schemes in the private sector, providing benefits to around 1.6 million employees. The loss of the contracted out rebate is likely to accelerate the already rapid decline in final salary benefit provision.

The Chancellor will also benefit from a windfall of around £5.5 billion as a result of the earlier scrapping of contracting out. Comment from Hargreaves Lansdown’s Head of Pensions Research, Tom McPhail: “This will be welcome news for the tens of thousands of women who would have missed out on the higher state pension as a result of reaching their state pension age just months before the introduction of the new terms. The pensions system is highly complex and this announcement will have knock-on consequences, notably for final salary scheme members who are likely to see their scheme terms adjusted a year earlier. It also illustrates the unpredictability of the pension outcomes, whether from changing investment conditions or from the government changing the rules. Pension providers have an important role to play in helping pension members to adapt their arrangements in the face of these constantly changing circumstances.”