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The government will today set out plans to overhaul the state pension system, moving to a single flat-rate payment of £140-a-week.
Pensions minister Steve Webb is expected to give the Commons details of radical changes designed to encourage more people to save for their retirement.
It will replace existing means-test arrangements for new, but not existing, pensioners from 2015 or 2016.
At present pensioners receive at least £97.65 a week but this will increase to at least £140 at current prices.
The proposals in today's Green Paper are set to benefit the self-employed and mothers who currently lose out on their pensions for having taken a career break to raise their children.
Speaking to Radio 4's Today programme this morning, the pensions minister said the system needed to be reformed to meet the demands of an ageing population.
Webb said: "Tomorrow's pensioners do face a very different world.
"They will, on average, be working for a lot longer, they will be retired for longer, they won't on the whole have final salary guaranteed pensions in the way that perhaps their parents did.
"We therefore need a simpler, clearer foundation because more of them will now be asked to save for their retirement."
In a written statementbefore Parliament, the pensions minister said the government is consulting on whether the existing pensions system is "suitable for meeting the challenges of the future".
"We want to create a simple, decent state pension, that is easy to understand and efficient to administer, which gives people more clarity and certainty about what they will get from the state, thereby giving them a firm foundation for decisions about saving to fund their retirement," said Webb.
Charity director at Age UK, Michelle Mitchell said the plans to consider introducing a higher, flat-rate pension were "very good news".
She said: "Our state pension system is one of the least generous and most complicated in the developed world so any move which takes away the guesswork for those nearing retirement is a step in the right direction.
"But the government must not turn its back on the 1.8 million current pensioners living in poverty. Much more should be done to get vital benefits cash to all those who need it."
The drive to cut incapacity benefit claimants will also be stepped up today, when one-and-a half million claimants will start to receive letters asking them to be tested for their ability to work.
Article Comments
I already get less than a full pension because I paid Married Womans Stamp for two years and therefore do not have full 39 years NI contributions.
Do I therefore loose out again with the new proposed pension? One wonders if the Conservatives realise that they will lose the backing of their hardcore support, the pensioner from the leafy suburbs and shire counties.
Suzie
4th Apr 2011 at 11:33 pm
If you reach retirement age before 2015, you will be forever on a pension about 40% less than pensioners retiring after that date.
If you have no savings, and no additional pension you will be able to apply for an additional benefit which will almost (not quite) make up the different. if you have been stupid enough to save, or you have extra pension (however small) you will get nothing extra. But you will have the pleasure of remembering that every pensioner younger than you will be getting about 2,000 pounds a year more than you in their state pension. I'm sure you will find that a great comfort! No one will be worse off than you are - and every new pensioner will be a very great deal better off!!
Its the 'squeezed middle' who lose out once again under every proposal of this government!
Michael Gallagher
4th Apr 2011 at 8:19 pm
I consider this New Pension deal to be discriminating against existing Pensioners. Why should anyone born before 1950/1 be worse off than younger Pensioners. If Mr Webb is encouraging people to save, I will tell him that I did save, but now cannot receive Pension Credit because I have saved too much. Furthermore my wife receives a smaller pension, because she chose the Married Womans Stamp. We were never told that we would be ripped off when we retired, with younger Pensioners getting Larger Pensions than us, with no questions asked (means testing).We have also been self employed, but were never able to arrange a suitable Pension, because we never earned enough. This is totally out of order, and I hope existing Pensioners will stick up for themselves, because nobody else will. Unlike Michelle Mitchell, Charity director at Age UK, I think that the introduction of a flat rate pension is not good news, unless it is fair for ALL Pensioners
Ray Smith
4th Apr 2011 at 4:55 pm
I feel this to be unfair for those nearing pension age!
Does it mean that someone retiring a few months prior to 2015 is denied the increase?
SHEILA FENNY
4th Apr 2011 at 1:56 pm
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