Flat-rate pension confirmed in Budget

Posted on March 25th, 2011 | Categories - Pensions

Universal pension rate is to become a reality.

This week’s Budget shows that the pension system will be revamped as planned.

Proposals to introduce a £140-a-week universal flat-rate pension have been confirmed in Chancellor George Osborne’s Budget.

Plans to simplify the current system had been outlined by the government earlier this year, however an exact figure had never been specified.

Mr Osborne said that the changes will take many years to implement fully and people who are receiving a pension already will not be affected. He did not reveal whether the flat-rate sum will rise in line with inflation.

At the moment the full state pension for both men and women stands at £97.65 a week. A top-up payment, which brings the figure up to £132.60 for single people and £202.40 for couples, is provided to the poorest pensioners through means-testing.

The Budget document stated that “it is not clear to working age individuals what they might receive from the state, in particular from the state second pension, making it difficult to plan retirement saving”.

It added that “the government will look to reform the state pension for future pensioners so that it provides simple, contributory, flat-rate support above the level of the means-tested guarantee credit”.

Some pension experts have championed the proposals because they will ensure that women who have taken time out of work to raise children – and have therefore failed to complete their National Insurance payments – do not have to suffer with smaller pension payments than men.