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.

 

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  • rate this
    +4

    Comment number 578.

    The bigger picture answer to all this is "economic growth". Without it the pot for pensions - and everything else - stagnates or gets smaller whereas the number of pensioners increases, both in absolute terms and relative to the working population.

  • rate this
    +11

    Comment number 577.

    Two tier Tories increasing the qualifying years and changing the rules which will disadvantage most in the long run. This while they are trying to bully through a 30%+ pay increase for themsselves.

    Politicians are there to look after the interests of themselves and their rich chums. The ordinary 95% are forced to fund their lavish lifestyles.

    Hideous Tories.

  • rate this
    +5

    Comment number 576.

    How to interpret this Government statement

    Fairer = unfair
    More = less
    Sooner = Later
    Better = Worse
    MP's = Cheats and Liars

  • rate this
    +12

    Comment number 575.

    While the wealthiest 1% are getting richer by the year, the 99% are squabbling over the crumbs which they have left at the table...

    Public - v Private
    Workers - v - Shirkers
    Pensioners - v - Youngsters

    The truth is that we are ALL being fleeced by the wealthist 1% and their political placemen. While we fight amongst ourselves, they sneak out the side door with the loot.

  • rate this
    +3

    Comment number 574.

    What about those who have already been told that they will not receive their pensions when they should but get them 6 years late because of the last 'shake up'.

  • rate this
    0

    Comment number 573.

    @ 3. Cynical Dave
    "These proposals for a flat pension mean even a £1/week private pension is worthwhile."

    My father paid out a fortune for private pensions which ended up worthless. Robert Maxwell pension schemes are everywhere.

  • rate this
    +2

    Comment number 572.

    Earlier today I used the link below to mail my MP asking for a justification for this new two tier arrangement that penalizes people like me that have paid in decades of NICs...I had a response within 30 minutes. He is going to ask the Pensions Minister immediately.

    Write to your MP now whatever party, it only takes minutes... no longer than posting on here!

    http://findyourmp.parliament.uk/

  • rate this
    -1

    Comment number 571.

    Idea is sound enough but I suspect political dogma will get in the way. Also believe that the flat rate should be paid to anyone currently recieving less than £144.

    As a former public service employee now in retirement but not 65 until after 2017 I expect to recieve the full £144 in addition to my public sector pension.

  • rate this
    +2

    Comment number 570.

    Obvious Tory trick. Dividing folk against each other. Current pensioners receiving less than new pensioners when this scheme starts in 2017

    First setting low paid against benefit claimants. Then it is setting pensioners against young people, & now it is setting pensioners against each other

    Dividing population to distract blame for economy still sliding downhill under coalition misrule?

  • rate this
    -3

    Comment number 569.

    548.DavieHooks

    'pragmatic and practical'

    I doubt most on here understand the meaning of those words

  • rate this
    +1

    Comment number 568.

    re Paul 545 - 402. Alba4eva
    Do you consider population must always grow to sustain the economy?" Pauls answer "The population doesn't have to grow, but the slower it grows (or the faster it decreases) the harder it is on everyone involved"

    Paul, dont you think that this is an unsustainable process then ???

  • rate this
    +2

    Comment number 567.

    35.Pete
    Just now
    The truth is that pensions in this so called wealthy country are lamentable by the standards of most advanced nations. Why can other countries afford to keep their elederly in a civilised fashion and we cant?

    Because their NI (or eqv) tax is much higher. In France for example its almost double. I expect if that was put forward on HYS the reaction would be interesting

  • rate this
    +5

    Comment number 566.

    i just watched the News at One on BBC. Though the lead story the information given was minimal and the piece was only a few minutes. More time and info was given to April Jones case and snow flurries (typical of BBC lately).

    I love the BBC but decisions about what is/isn't covered is becoming a joke. It is become so regular I'm now wondering if something more sinister is being this?

  • rate this
    +5

    Comment number 565.

    Your state pension isn't taxed. This is true. When you get your state pension they take extra tax from any other sources of income you might have. I know this because I qualified for my state pension last October. Weasel words from weasel politicians.

  • rate this
    0

    Comment number 564.

    @544. Which bit of this is "wreaking havoc" in your well reasoned comment?

  • rate this
    +1

    Comment number 563.

    These plans do not include the "frozen" pensioners who have chosen to live abroad, outwith the EEC and certain other countries. These pensioners are only too aware that their basic pension will not rise, despite promises made by Government ministers. WHEN is this problem going to be resolved and the overseas pensioners paid their correct pension in line with their NI contributions?

  • rate this
    +18

    Comment number 562.

    This is all very well talking about the number of qualifying years being 30 to get the full pension amount. What it does not say is what you get if you don't have full number of years. I know lots of people, including myself, whereby HMRC-Longbenton cannot find our work records from more than 20 years ago, so I don't get credit for having worked those years. That's not fair either!

  • rate this
    +5

    Comment number 561.

    525. sodapop
    478. Berba9
    Re: Vicky Pollard / Rebekka Riot

    I agree , actually I think the former has been reincarnated from the vociferous cantsilencemenow id which was probably removed by the mods.

  • rate this
    +2

    Comment number 560.

    512.joe b
    You will recieve your service pension on the date as was agreed when you left the forces. Your private pension date should be governed under the same ruling. Your state pension is anybodys guess, and yes you have to pay tax on the whole lot, sorry.
    (What branch of the service were you in that didn't use capital I's?)

  • rate this
    0

    Comment number 559.

    Does anyone know if once this new higher pension comes into being, those pensioners will lose free prescriptions, bus passes,eye tests etc?

 

Page 28 of 56

 

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