Posted on October 26th, 2010 | Categories - Pensions
State pensions may become bigger, uniform and applicable to all regardless of savings and income levels under proposed government plans.
Pension provision could be made less complex with the introduction of a single level system that abolishes means testing under new government suggestions to be published this year.
A government pension shake-up could result in the introduction of a new £140-a-week state pension, scrapping the traditional means tested system.
Ministers are planning to simplify the current process so that all pensioners will receive the same amount under a single tier system.
At the moment a single person can receive £97.65 a week and couples can receive £156.15. Poorer pensioners can apply for an extra cash top-up through means testing but many of them fail to be eligible due to their private savings – the changes mean that many pensioners could receive more than ever before.
A spokesman for the DWP said: “The chancellor has confirmed that the government will improve the quality and accessibility of pensions in the spending review period. We will be bringing forward proposals for reform later this year. Our aim will be a simple, decent state pension for future pensioners, which is easy to understand, efficient to deliver and affordable”.
Business Secretary Vince Cable said:“[the changes will] make sure people can look forward in retirement to a good state pension without means-testing – we need something people can rely on”.
The government believes that removing the means testing element to pension provision will lead to a reduction in bureaucracy and an ultimate annual saving of £6 billion a year.
Experts have said that married couples and stay-at-home-mothers will benefit the most from the changes – people who decide to stay at home to look after their children often fail to qualify for a full basic pension because they have not paid sufficient national insurance contributions during their employment years.
The proposals will be published in a Green Paper before the end of the year and are planned to be implemented by 2015.