Queen’s Speech outlines pension changes
The Queen’s Speech has outlined plans to introduce a flat-rate state pension in England, Scotland and Wales and to automatically increase the pension age in line with longevity.
A new flat-rate of £140 will replace the current full state pension, which stands at £107.45 a week, but can increase to £137.35 with pension credit.
The flat rate is designed to eliminate the current problem of people failing to claim pension credit when they are entitled to do so.
It could also benefit self-employed workers and some women who currently may receive a lower state pension under National Insurance rules.
The new flat-rate pension is expected to increase to £155 by 2016 in response to inflation.
It will only be available to new pensioners and will not apply to existing pensioners which means that a two-tier system will operate for some time.
The Queen’s Speech also outlined an increase in the state pension age to 66 for both men and women by 2020, and to 67 between 2026 and 2028, for people who are now aged 52 years or younger.
Further increases will take place automatically in line with changes in longevity, either through a regular official review, or through a formula linking pension age to average life expectancy.
Joanne Segars, chief executive of the National Association of Pension Funds, said: “This is another big step towards a simpler, more generous state pension that no longer penalises people for saving.
“A new system will take millions out of means-tested benefits and will encourage people to take control of their own age by saving towards it.”
Pension experts have warned that the changes could lead to the state pension age increasing at a faster rate than anticipated.
Other changes outlined in the Queen’s speech include measures to break up the banks to protect against a financial crisis.
The Queen said that the government’s first priority was to reduce the deficit and restore economic stability.