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State pension ranges from £7 to £230, DWP reveals
Government urged to introduce flat-rate state pension quickly to stop huge variations in state pension payouts.
by Michelle McGagh on Aug 21, 2012 at 16:31
The Department for Work and Pensions (DWP) has released figures that reveal just how messy the state pension system has become, with payouts ranging from £7 to £230 a week.
Research shows state pension benefit can vary by as much as £200 a week, or £10,000 a year, because of variations in basic and additional state pension payments.
Around 13,000 receive £7 or less a week, and the same number receive £230 a week or more.
The pensions maze
The complexity of the UK pension system and the regulation surrounding it means people have no way of working out what they should receive each week and cannot budget for their needs.
The government plans to replace the archaic system of a basic state pension plus addition entitlements with a £140-per-week flat-rate pension for new pensioners. However, plans to introduce the flat rate have been delayed until later in the year because the government is struggling with the complex pension rules.
‘The range of state pension payouts at the moment is simply staggering. The current system is so complex and would baffle even Einstein,’ said pensions minister Steve Webb.
‘Worse, if people have no idea what they will get, they can’t make sure they have enough savings for their retirement. We can’t go on playing roulette with pensions. A flat-rate single-tier state pensions will restore simplicity and give people certainty instead of chance. And it will provide a sure foundation for further saving.’
Pensions expert Ros Altmann agreed with Webb that the state pension system is too complex and relies too much on means-testing, which ‘penalises those who tried to save for their retirement’ and leaves women worse off than men.
‘The reality is that it is predominantly higher earning men that get the highest state pensions, while low-earning women get the lowest. This clear unfairness is a legacy of the past piecemeal patchwork of pension changes, and radical reform is long overdue,’ she said.
Time for reform
Altmann urged the government to introduce the flat-rate state pension as soon as possible: ‘The DWP promises to unveil a new system soon, with a flat-rate state payment for future pensioners. We welcome the prospect of an adequate state pension that would lift most people above means-testing.
'The new pension system should be fairer and simpler and no longer treat women as second class citizens but we still need to see the details of the new framework and how the government plans to implement it in order to ensure fairness.
‘We also need to see what will happen to current pensioners who are in the existing unfair system and whether any plans will be unveiled to help them.’
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