Flat-rate state pension 'expected to start in 2017'

 

Pensions Minister Steve Webb: "People will retire with a single, simple, decent state pension"

A new flat-rate state pension likely to start in April 2017 will be outlined by the government on Monday.

The weekly payment will be £144, plus inflation rises between now and 2017.

The current full state pension is £107.45 a week, but can be topped up to £142.70 with pension credit, and by the state second pension.

But people will have to work longer, making 35 years worth of National Insurance (NI) contributions, rather than the current 30.

Anyone who has not paid NI for at least 10 years will not qualify for the enhanced state pension at all.

The pensions minister, Steve Webb, said the new system would be much simpler.

"At the moment, nobody has a clue what the state is going to pay them," he told the BBC.

"We have a basic pension, a second state pension, a pension credit - it's fiendishly complicated. So we are proposing a simple system, not a more expensive one... that will help people plan for their retirements.

"Now, men and women will build up pensions in their own right. And women coming up to pension age who have got a damaged pension record, because they brought up children, will have that restored," he added.

Millions of current pensioners, and those who qualify before the cut-off date, will continue to receive their entitlement under the current system.

Overhaul

A universal flat-rate payment in England, Wales and Scotland will be the biggest overhaul of the pension system for decades.

It will involve merging the state second pension with the basic state pension, to create one flat-rate payment.

It will be paid only to new pensioners reaching state pension age from 6 April 2017 and, for them, do away with the need for the pension credit system.

The self-employed will benefit, as they tend to get a lower state pension.

Paul Johnson, director of the Institute For Fiscal Studies (IFS) said: "The self-employed will be the one group who are unequivocally better off in the long run, because at the moment they are not earning any state second pension, and in the long run they will get the whole £144 or so."

Chris Curry, from the charity the Pensions Policy Institute, said the people who would benefit from the new system would be those who had traditionally done very badly under the current system, such as women.

"[These are] people who don't make enough contributions throughout their working life to, in particular, the state second pension, which includes people with intermittent work patterns, periods of low earnings and the self-employed," he said.

Second state pension

The benefit of a higher state pension will be partly offset by the requirement to make contributions for longer through NI, in order to get the full amount.

Pension facts

  • Currently 11.5 million people claim the state pension
  • 2.8 million women receive a state pension of less than £80 a week. Only 474,000 men do so.
  • 3.2 million individuals receive pension credit to supplement their retirement income.
  • Source: DWP

The government will also explain exactly how the state second pension, which acts as a top-up to the basic state pension, will be removed.

At the moment, some prospective state pensioners will accrue a higher level of state pension than £144 a week, via a combination of their basic and state second pensions.

As the government has promised that all their accrued pension rights will be recognised, the new system may have to involve some future pensioners being paid a top-up to the new, merged, flat-rate payment.

Final-salary pensions

Meanwhile, several million employees in the private and public sectors are opted out of the state second pension because their final-salary schemes pay an equivalent benefit.

As a result, they pay reduced NI contributions.

The change will bring an end to this system of "contracting out", with two consequences.

The government will have to decide if these individuals should receive the full flat-rate pension, if they first qualify for it after April 2017, despite the fact that they will not have not been making full national insurance contributions for the state second pension in the preceding years.

Shadow Pensions Minister Gregg McClymont warned of ''heavy losers'' if the proposals go ahead

The government must also decide if these people should start paying higher NI contributions, after that date, while still in work.

Someone on an average wage might have to pay an additional £270 a year but their state pension would also be greater.

Paul Johnson said: "At the moment, if you are on a public sector occupational scheme, you are effectively giving up your right to the state second pension."

"Under this new system, you would get the full flat-rate pension, plus you would continue to get your public sector occupational scheme," he added.

Under established plans, the state pension age is rising in any case to 66 for both men and women by 2020, with further plans for this to increase to 67 between 2026 and 2028.

The state pension is expected to continue rising, as now, in line with earnings, prices, or 2.5%, whichever is higher.

 

More on This Story

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    0

    Comment number 1118.

    @1115.creepy2
    "@ 1112 rifra dont understand people like you you must be nearly 60 i guess. then why act ?"

    Because Im bored to the back teeth with reading all the other smug sententious crap on here from folks like you. Its called "being ironic".
    As well as having good typing skills, I am also a good few years away from 60 - thanks very much for the exchange of compliments

  • rate this
    -1

    Comment number 1117.

    @1113.Knut Largerson

    I know what you mean - the backlash against the royals could be a most unsavoury aspect of all this austerity. The Queen as head of state etc endorsing by her silence and by signing into law the actions of an undemocratically chosen coalition etc., etc. Are there any Romanovs left who could advise Her Maj?

  • rate this
    0

    Comment number 1116.

    It's clear that the system has needed some kind of overhaul for quite some time and needs to reflect: an ageing population; fairer contribution/payout ratio and transparency. One can only hope that the simplification is not just a ruse to cut down on central Gov't costs and short change people who have contributed a great deal.

  • rate this
    0

    Comment number 1115.

    @ 1112 rifra dont understand people like you you must be nearly 60 i guess. then why act like a 5 year old ?

  • rate this
    -1

    Comment number 1114.

    @929.AndyC555
    " We MUST accept that we need to work longer, pay in more and even then maybe get back less."

    BRING ON THE JOBS THEN ANDY.. THE NATION LOOKS TO YOU (as do the Ukranians - posing as Poles, and many many others of the Slavic workforce). Jobs = NI contributions.Where are the jobs? How about a level playing field for once?

  • rate this
    +1

    Comment number 1113.

    This is our own Parliament doing this to us.

    And the Queen remains silent.

  • rate this
    0

    Comment number 1112.

    Im all right Jack ! Im a self employed idiot who bought his house 40 years ago for £2000 - had a couple of largish redundancy sums to help me on the way & after all that scrimping &saving I am in a position to live on £170 per week.. so nah nah neenana at all you plebs who are just about to be robbed even more. 'Will be voting Tory next time around. God I'm a bore.. too many mince pies!

  • rate this
    -1

    Comment number 1111.

    what a bloody joke, the government should be looking at the benefits that are paid out to all the foreigners that are flooding into this country before they start cutting the pensions of people that have done their bit and paid their national insurance contributions.It won't be long before all these politicians will have to answer to the British public. This country has become an absolute joke.

  • rate this
    -1

    Comment number 1110.

    I welcome the single NI contribution at last self employed people can get access to pensions

    The government continues to fail by not having a
    two tier pension

    UK state pension
    commonwealth pension which is lower for those who choose not to live in the UK and pay tax here

    A real problem is the absense of disabled people gaining access to private pensions as though they were in the work force

  • rate this
    0

    Comment number 1109.

    @893.geoff
    Ahh but you can graft 80hrs a week matey but by todays rental and mortgage costs you STILL COULDNT LIVE ON £170 PER WEEK DUH!

  • rate this
    +4

    Comment number 1108.

    My wife and I each get the State Pension. Me with over 44 yrs work and my wife with over 35. I receive £107 a wk - £5564 a yr. My wife gets the same as me. The new pension after 35 years work will be £144 a wk - £7,488 a yr. Jointly we get £11,128 a yr.We have worked and saved for over 79 years. New pensioners will get £3,848 more than us for 70 yrs work. Pensioners vote with your feet.

  • rate this
    +2

    Comment number 1107.

    So tonight HMV has finally gone belly up. Unsurprisingly no more major high street music sellers - it's all gone to Amazon and their like. It was inevitable really, but still sad. No pensions for the people at Amazon. Allegedly their staff have to PAY to park outside their workplace. Mind you, I guess many working in city centre shops also have to pay for parking. Pension funds rule.

  • rate this
    +1

    Comment number 1106.

    A lot of people on here annoyed that the pension system they had agreed to and the plans they had made for retirement have been radically changed without them having any say at all. Now you know how to public sector felt when its pensions were destroyed by Osborne and how the private sector felt when Brown stupidly raided those pots too.

  • rate this
    -1

    Comment number 1105.

    Half your pension goes to loved ones - the rest pays for you to go to dignitas.

    your country needs you....to kill yourself and stop being a drain on resources you selfish breather.

    God, this country repulses me

  • rate this
    +2

    Comment number 1104.

    1102.mug4working
    Just now
    I wonder if Cameron and his cronies ever taken the trouble to read any of the comments... because they really need to. Perhaps it will make them think about what they are doing to us and realize how many people's
    votes they WON'T be getting next time.
    ~~~
    You can have 100% of £107/£144 or gamble on what you might get if Labour go on spending spree again?

  • rate this
    +2

    Comment number 1103.

    Dear All,
    Of course whatever MP Steve Webb proclaims he can not please everybody,But one would in my opinion have done better by making the pension payments equal for all pensioners present and future claimants.
    With no other allowances or credits whatsoever.About £200 per week each should be about right.

  • rate this
    +2

    Comment number 1102.

    I wonder if Cameron and his cronies ever taken the trouble to read any of the comments from people they have displeased, because they really need to. Perhaps it will make them think about what they are doing to us and realize how many people's votes they WON'T be getting next time.

  • rate this
    +3

    Comment number 1101.

    A simple system is a good idea, but I don't think they will get voted in again if they don't equal the pension to those already in receipt. To think I ( along with thousands of others ) will be £30 a WEEK worse off after 50 years of contributions is just plain wrong.

  • rate this
    +2

    Comment number 1100.

    The optinum formula 1 car, operating at full capacity, its engine would explode as it passed the finishing line.

    The govt, all the mainstream parties, would love us to combust when we had finished our usability. ie die when we cant contribute

    i think hitler called them 'useless eaters'

  • rate this
    +3

    Comment number 1099.

    So in 2017, all NEW pensioners, having paid NI for a minimum of 35 years will qualify for a State Pension of approximately £144.00. per week.
    How can that be construed as fair when it EXCLUDES those who already are drawing State Pensions. A Pension for which some of them had to pay NI for 44 years for men or 39 years for women to qualify for a "full" pension. Reeks of double standards methinks.

 

Page 1 of 56

 

More Business stories

RSS

Features

  • Baby being handed overFraught world

    The legal confusion over UK surrogate births


  • Bad resultsBlame game

    The best excuses to use when exam results don't make the grade


  • Welsh flagDragon's den

    Why Wales will make its own mind up on independence


  • Police respond to a shooting in Santa MonicaTrigger decision

    What really happens before a police officer fires his gun?


  • Child injured by what activists say were two air strikes in the north-eastern Damascus suburb of Douma (3 August 2014)'No-one cares'

    Hope fades for Syrians one year after chemical attack


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.