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The government is looking at a major reform of
the state pension system.
It is thought the overhaul will lead to a
simplification of the current regime and an increase in the amount
paid to pensioners.
The changes will mean that everyone will
receive the same £140-a-week payment, but means tested top-ups will
end.
At the moment, pensioners are entitled to
£97.65 a week for single people and £156.15 for couples.
The poorest pensioners get means-determined
additional benefits.
Under the new system, the means testing will
go and all single pensioners will get £7,280 a year in state
payments, with couples receiving £14,560 annually.
The details of the plan are to be published in
a government green paper later in the year.
The government hopes that the removal of means
testing will save some £6 billion in admin costs and that a
single-tier pensions system would cut down on benefits dependency.
Women are likely to gain from the changes
because they often fail to qualify for a full state pension for a
lack of a complete national insurance payment record. This happens
as a result of taking time out of work to look after their families.
A spokeswoman for the Department of Work and
Pensions said: "The Chancellor has confirmed that the government
will improve the quality and accessibility of pensions in the
spending review period.
"We will be bringing forward proposals for
reform in a green paper later this year. Our aim will be a simple,
decent state pension for future pensioners, which is easy to
understand, efficient to deliver and affordable."
Instead of structuring pensions on means
testing, the new system would be based on residency. British
citizens or people who have been living in the country for a certain
number of years would be eligible for a state pension.
People with savings which are over the income
tax allowance threshold would not receive the full amount. And those
who have opted out of the state second pension would have to pay
slightly higher national insurance contributions.
The government intends to lift the state
retirement age for both men and women to 66 by 2020.
It is thought that the new payment system will
be in place before the rise in the age threshold.
Speaking in an interview, Vince Cable, the
Business Secretary, said: "It's to make sure people can look forward
in retirement to a good state pension without means testing. We need
something people can rely on.
"What Steve Webb, the Pensions Minister,
proposing is very radical. It will take time to introduce."
Mr Cable added that the aim of the proposals
was to "ensure that fewer and fewer pensioners are dragged into the
means-tested system and they have a decent state pension that they
continue to rely on. But this depends on the state of the public
finances as to when this is phased in". |
