Page last updated at 15:54 GMT, Saturday, 7 November 2009

Pensioners to lose payment choice

By Paul Lewis
Presenter, Radio 4's Money Box

Middle-aged couple on a bench
The state pension will be paid in arrears for new pensioners from April

People claiming their pension from next April will no longer be able to choose to receive it in advance.

A state retirement pension is usually paid four weeks in arrears but individuals can choose to have it paid weekly in advance.

This choice will be lost as part of major pension rules changes from 6 April 2010.

The Department for Work and Pensions said the new system would save £10m a year by 2020.

Savings from arrears

A DWP spokesman stressed this was not primarily a money saving measure but said: "Paying in arrears will reduce the amount of money that [the Department] overpays and has difficulties recovering when a customer dies."

Pensions minister Angela Eagle told Parliament: "Existing recipients of state pension and pension credit will continue to have a choice about how frequently they are paid."

The spokesman confirmed this would mean that people over state pension age on 6 April who were being paid in arrears would still be able to switch to weekly advance payments if they wanted to in the future.

Pay day change

New pensioners will lose the choice but will be able to choose weekly, fortnightly or four-weekly payments in arrears.

That means they will get their pension - and the annual increase in it - at least two weeks later than those who have their pension paid a week in advance.

As well as scrapping payment weekly in advance the government will change the day on which the state pension is paid. At the moment most pensions are paid on a Monday with some being paid on a Thursday or Tuesday.

Wider changes

From April each new pensioner will be allocated a pay day from Monday to Friday depending on the last two digits of their National Insurance number.

People moving from working age benefits to a pension will either keep the same pay day or receive a part week's payment to cover the gap.

At the moment pensioners can be left without benefit for several days.

Similar changes to move payments in advance to arrears and to relate paydays to National Insurance numbers were introduced in April 2009 for single parents and those on Jobseeker's Allowance and other benefits.

BBC Radio 4's Money Box is broadcast on Saturdays at 12 noon, and repeated on Sundays at 2100h. Download the podcast.

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