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Gov't to introduce £144-a-week flat-rate state pension from 2017

by Daniel Grote on Jan 14, 2013 at 07:42

Gov't to introduce £144-a-week flat-rate state pension from 2017

The government will today outline detailed plans for the implementation of a flat-rate state pension, including measures requiring a longer record of national insurance contributions (NICs), and a softening of the blow for higher earners.

The Department for Work and Pensions will publish its long-awaited white paper on state pension reform this afternoon, committing to introduce a pension worth £144 a week in today’s prices from April 2017, according to reports. It will hike the number of years of NICs required to qualify for the full state pension from 30 to 35, and introduce a minimum of 10 years of NICs to qualify for any state pension.

According to the Financial Times, the paper will also include a measure to protect those affected by the abolition of contracting out that will accompany the reforms. The introduction of a flat-rate state pension will remove the need for the state second pension (S2P). Around six million workers have contracted out from the S2P, and received a national insurance rebate.

With the abolition of contracting out and the rebates, these six million would face an effective tax rise of up to 1.4%. But according to the FT, the government will outline a mechanism which will allow them to recoup that sum through annual credits for the remainder of their working lives.

The white paper will also outline a link between the state pension age and rising life expectancy. According to the FT, the paper will recommend the age be reviewed at least once during the life of each parliament and a minimum of 10 years’ notice be given for any change.

The flat-rate pension will be paid only to new pensioners reaching the state pension age by April 2017. Entitlements accrued under the current system before then will be honoured.

9 comments so far. Why not have your say?

Jonathan Kirby

Jan 14, 2013 at 09:48

As they say this is an advantage to the Self Employed in future.

As someone who has paid class 4 NIC since the 1980's for which I receive absolutely no benefit why is that just because my state retirement is 2015 I will be treated as a second class citizen?

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thomas west

Jan 14, 2013 at 09:56

This seems to make sense, I seem to recall a statistic that only 25% of retirees did not qualify for Pension Credit so it would seem that 75% do. Providing a flat rate system will reduce the red tape and civil service time involved and should pay for itself. The other issue is auto enrolement; would you seriously advise a client in their fifties who had not make any retirement provision to enter a workplace pension scheme?

Under the current system any private pension provision would restrict any means tested top-up benefits so in effect, a fifty-year old worker would be paying towards his financial demise. With the flat rate system in place any additional pension would just make his retirement a bit more comfortable and worth paying for.

So isn't that the point of paying into a pension?

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Tony_Laverick

Jan 14, 2013 at 10:30

If the details aren't being announced till later, how come there is so much comment on the web, most of which is ill-informed? Suggest we wait for the detail before jumping in.

I will be very interested to see how they plan to deal with the old C/Out Deduction issue, amongst other things.

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James

Jan 14, 2013 at 10:45

Tony - they leak 90% of the stuff beforehand, that's why.

The leaks probably started in a small way under Maggie, but became a torrent under Blair.

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Banged to Rights

Jan 14, 2013 at 12:00

Beware Greeks bearing "gifts" the details will show that the increase is no such thing when all the figures are worked out it will the cost treasury less overall than present remember the time limits are longer and the the age is greater and the other benefits currently being paid (if claimed) will be withdrawn bit by bit.Very few will be up to the math and even fewer journos will report.

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Tony_Laverick

Jan 14, 2013 at 12:01

I appreciate that James but comments on some other forums are so specific they must be wild speculations. They normally only leak what they want you to hear but in this case, the speculation has been extreme and will surely stick even if unfounded.

Does not bode well for auto-enrolment.

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Tony_Laverick

Jan 14, 2013 at 12:13

Precisely BTR

I don't think anyone in their right mind would expect an improvement in current conditions but this is really kicking off elsewhere and appears informed as to the losers.

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Eamonn Dorling

Jan 14, 2013 at 13:21

I think that the point Thomas makes would encourage a higher take up under auto enrollment because more could actually benefit from their prudence (a word not used so much since Gordon)

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The Other Side

Jan 14, 2013 at 19:03

I'm wondering, judging by a lot of the negative comment out there in the news (not here) if I'm the only one who thinks it's a great idea??

As mentioned above, if this means that everyone gets the same, and those who save on top, be it in their own PP, or via company schemes(as part of part of auto enrolment or not) will then be better off?

Comments above say it all, why advise your client at 50 to make provision when it means (on current rules) they may be worse off??

Finally the governement are doing something that helps the 'less well off' (something that gets lambasted in the press and media) and may cost the rich (what so many have asked for) and they are coming under fire for it.

They can't win!!

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