Plans for a new single flat-rate state pension, to be introduced by 2017, have been unveiled by pensions minister Steve Webb.

In a paper published yesterday, it was announced that the state pension will be simplified to a flat payment of £144 a week. This is a move from the current system, where the state pension of £107.45 can be topped up to £142.70 through means-tested credit.

The paper also outlines plans to abolish the contracting out of the second state pension for defined benefit pension schemes.

The number of years of National Insurance contributions has been increased from 30 to 35 years, whilst anyone who with fewer than ten years of contributions will not receive the pension at all.

No further changes to the state pension age will be made until 2015. The government will review the state pension age in each parliament, a process that will be informed by the Government Actuary’s Department.


Whilst the government claims that the current system is too complicated and the new, simplified system will bring more people into the savings scheme, the plans have come into criticism.

Labour claims  there will be ‘heavy losers’ with the new proposals, and more than 400,000 women about to retire will miss out if the plans go ahead. Andrew Vaughan, chair of the Association of Consulting Actuaries warns that the pension scheme won’t deliver enough income for people to maintain their current lifestyles upon retirement.

However Otto Thoreson, director general of the Association of British Insurers, was more positive: ‘with greater clarity about what the state will provide and automatic enrolment to encourage people to make additional provision for their retirement through the workplace there is a real chance to create a savings culture in the UK. We welcome today’s proposals to take forward this legislation.’

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