Universal pension may rise to £155 a week

Posted on April 2nd, 2011 | Categories - Pensions

The pension system is to be overhauled to make it simpler.

Flat-rate pensions will be better for low earners and women who have taken time out of work to have children.

A universal flat-rate pension of £155 a week may be revealed by pensions minister Steve Webb next week.

Previous indications from the Work and Pensions Secretary Iain Duncan Smith outlined that the flat rate would stand at £140. However, with no changes set to be implemented for the next four years, the figure is likely to rise with inflation.

Currently a single person receives a basic state pension of £97.65 a week and a couple receives £156.15. Extra benefits are provided to the poorest pensioners through a means-tested system. However, this aspect of pension provision will be scrapped to streamline the complex process.

People who are already receiving a pension will not be affected by any of the changes.

Laith Khalaf, of Hargreaves Lansdown, said: “The way we imagine it working is that all the elements of the existing system are rolled into one into a simplified state pension”.

He added: “The winners will include lower earners, women who have taken time out to raise a family and potentially the self-employed. These people would have typically expected a lower pension than £155”.

A spokesman for the Department for Work and Pensions said: “Speculation of what the benefit rates would be in years to come is just that. We have been clear that reforms for future pensioners would bring in a simple, contributory, flat-rate support above the level of the means-tested Guarantee Credit. We will be bringing forward a Green Paper to consult on options shortly”.