New flat rate state pension scheme revealed
The Government has now provided details of the new flat-rate state pension, as well as increases in the retirement age – due to be equalised at 65 by 2018.
The state pension age will then be lifted to 66 for both men and women by 2020.
Meanwhile, it was announced that the new pensions system should make pension planning easier to understand – stripping out the current complex means-tested payments system and will move towards a flat-rate payment for men and women.
The new system is expected to come into force by 2015/16.
Work and Pensions Secretary Iain Duncan Smith explains: “We have to send out a clear message across both the welfare and pension system: you will be better off in work than on benefits and you will be better off in retirement if you save.”
The basic state pension will see the introduction of one universal payment of £140 but with inflation added, this will rise to around £155 a week by 2015.
This compares with the current basic state pension of £97.65 for a single person and £156.15 for a couple.
However, the new flat-rate will not apply to the millions of people already being paid a state pension as they will continue with existing arrangements.