New state pension 'at least £155'

Pension files
Image caption The idea of a flat-rate state pension has been discussed for some months

Plans to reform the state pension will be unveiled next week - with a new flat-rate scheme to start in 2015 or 2016, the BBC understands.

The flat-rate pension could be worth at least £155 for new pensioners.

Detailed plans are expected to be published next week, outlining how the system would be introduced.

The current full state pension is £97.65 a week for men and women, but is topped up to ensure a minimum income of £132.60.

The current minimum income guarantee also ensures couples get £202.40 a week through the means-tested pensions credit.

"It is assumed that inflation-linked increases will take the means tested guarantee up to around £155 by the middle years of this decade," said the BBC's chief economics correspondent, Hugh Pym.

"The government may decide to bring in the new single pension at a slightly higher level."

This would also be higher than the figure of £140 a week previously mooted by the government.


Plans for a universal, flat-rate state pension have been discussed for a number of weeks.

Final confirmation of the government's intentions was given in Chancellor George Osborne's Budget on 23 March.

He said that the flat-rate pension would only be available for new pensioners reaching state pension age, rather than the millions of existing pensioners.

The government wants to simplify the state pension.

The planned reform would mean the state second pension would be abolished, although the government would honour contributions that had already been made ahead of the change.

It would also bring "contracting out" arrangements to an end, where some people pay lower National Insurance contributions because their second state pension is contracted out to their company final salary pension.

Details of how they would be affected are likely to be revealed in the government's full plans.

More than one-and-a-half million eligible pensioners do not claim pension credit, and the government believes that such individual losses of entitlement would not occur under a simpler flat-rate system.

However, there is likely to be debate over the "fairness" of a flat rate which makes no distinction between poor and wealthy new pensioners.

When the state pension was introduced in 1909, the maximum payment was five shillings (25p) a week - the equivalent of about £20 today.

Just over 500,000 people queued up to receive it. They had to be at least 70 years old and have an income of less than 12 shillings a week.

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