State pensions: ministers plan to pay £140 a week

[SoCalDem]

http://www.guardian.co.uk/politics/2010/oct/25/state-pensions-reform-simplified-end-means-testing
* Jo Adetunji
* The Guardian, Monday 25 October 2010

Old people spending habits The state pension may be standardised at £140 per person per week. Photograph: John Stillwell/PA

Ministers are planning a radical transformation of state pensions, which will see the system simplified and the amount available to pensioners increased. Everyone will receive the same £140-a-week payment and there will be an end to means-tested top-ups. Under the current system, a single person can receive £97.65 a week and a couple £156.15, with an extra means-tested amount available for the poorest pensioners. The changes, which are due to be detailed in a green paper by the end of the year, mean a single person could receive £7,280 a year and a couple £14,560. Ministers believe that removing means testing and the resulting reduction in bureaucracy will save around £6bn a year. They believe a single-tier system would also reduce reliance on benefits.

The changes are likely to benefit married couples and stay-at-home mothers the most, as the latter often fail to qualify for the full basic pension because they have taken time out from work and have not built up enough national insurance contributions. The proposal should give a boost to the coalition government after it came under intense criticism for scrapping child benefit for those earning more than the £44,000 threshold. A Department for Work and Pensions spokeswoman said last night that the proposals would make the pensions system easier to understand. "The chancellor has confirmed that the government will improve the quality and accessibility of pensions in the spending review period," she said.

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"The current system is very complex," the Daily Mail quoted a senior coalition source as saying. "It forces too many older people to be reliant on means testing, with many not taking up the support offered by the state. Too few are rewarded for working and saving, and it generates unequal outcomes for men and women. A radically reformed state pension will reward people who work and save, clarify the deal for future pensioners, and simplify the role the state plays in providing a clear and solid foundation for old age." Instead of basing pensions on means testing, the new system would be based on residency, with British citizens or people who have been living in the country for a certain number of years qualifying. Pensions are taxable, so people with savings which are over the income tax allowance threshold would not receive the full amount.

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Although reforms were due under Labour, the previous government had planned to increase the pension age gradually to 66 by 2026. Responding to the planned changes, Ros Altmann, a former pensions consultant to the Treasury and the newly appointed director-general of Saga, said: "A full-rate citizens' pension would be the most fantastic reform. The current system was designed decades ago by men and for men. It isn't fair to women."