Government to announce new flat-rate state pension
Details of the new flat-rate state pension expected to be worth £155-a-week will be announced later today as the government sets out its plans to simplify the state pension system.
The new flat-rate pension is being introduced in part to simplify state pension arrangements and will replace means-tested pensions for new pensioners from 2015 or 2016. Existing pensioners will continue to receive their state pension under the current system.
The current state pension provides £97.65 per week for a single person and can be topped up to £132.60 per week with pension credit. The new state pension will pay a guaranteed flat-rate of £140 per week and inflation is likely to increase the amount to £155 by the time it is introduced.
Under the new system the second state pension would be phased out and ‘contracting out arrangements, where some people pay lower rates of National Insurance because their second state pension is contracted out to their company final salary pension scheme, would also be abolished.
Under the current system many pensioners lose out on pension credit and the government thinks that under a simpler flat-rate system the amount of pensioners not claiming this element would reduce.
As previously announced by Works and Pensions Secretary Iain Duncan-Smith, the retirement age is to be increased to 66 for both men and women due to requirements of European law.
The new flat-rate pension was announced in October’s spending review and confirmed in the Chancellor’s budget on March 23rd this year.
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