Pensioners in line for £2,000 state pension boost

3 March 2011

The average pensioner could see their state pension income increase by £42.35 a week if new plans are put into effect.

Over a year this would equal a rise of £2,202 – up from £5,077 to £7,280.

Work and Pensions secretary Iain Duncan-Smith is appealing for a simpler and increased state pension that would pay a flat weekly fee of £140 to everyone.

Later this year, the government plans to introduce auto–enrolment to workplace pension schemes for all workers. However, pension experts want to see a simpler state pension system first.

"This is a wake up call that we need a much simpler system pronto to allow people to plan their own retirement savings," says Laith Khalaf pensions analyst for Hargreaves Lansdown.

Dr Ros Altmann, Saga's director general, adds that: "Auto–enrolment cannot safely proceed without £140 a week state pension."

She is concerned that millions will lose means–tested benefits by paying into a new auto–enrolled scheme. In comparison, the new state pension would rule out means testing so that anyone paying into a workplace pension wouldn't lose out.

Looking at the numbers

The £140 state pension would be available to anyone who has a full national insurance record. It would combine the basic state pension and second state pension into one.

Those entitled to higher state pensions would still be able to receive more than the statutory £140.

The full basic state pension is currently £97.65 a week for a single person and £58.50 for a married or civil partner using their partner's national insurance record.

Altmann adds that if these moves had been introduced sooner, perhaps the pensions crisis could have been avoided.

She says: "At least for people reaching pension age in future, there would no longer be mass means-testing in the state pension system and their private pension savings would be theirs to keep, without being penalised by means-testing of pension credit."

The Department of Work and Pensions (DWP) says it is working with the Treasury on these reforms but that there is still no timeframe for when they will be introduced.

A DWP spokesperson says: "For quite a while now, there's been call for a 'citizens pension' so to speak and we're committed to that. What we want is a nice and simple pension. We want to simplify the state pension system.

"The aim is a simple, decent state pension for future pensioners, which is easy to understand, efficient to deliver, affordable and provides a firm platform for workplace saving."

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