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Flat £140 state pension update?

Retirement | State Pension

By Justin Modray, published 09 March 2011.
Helpful? 17

Lots of news coverage this week about the proposed flat weekly state pension. But does it tell us anything new?

The Government has made a bit more noise this week about its desire to introduce a flat state pension. But has it told us any more than we already knew? (which wasn't much - see my previous article) - not really.

We're still no clearer on:

  • How much a flat state pension would be, although £140 is the 'target' figure still being bandied about.
  • What will happen to those who've built up extra state pension entitlement via SERPS, S2P or buying extra years (to me it seems inevitable they'll lose out to some extent).
  • Whether the changes will apply to everyone or only those retiring after the new system is introduced - although rumours suggest the latter.
  • How the pension will be funded. The Government can't afford to spend more so any extra expenditure will need to clawed back from elsewhere.
  • When a flat pension will be introduced.

In theory this information, or at least firm proposals, will be contained in a government 'Green Paper', but again no official word on when this will be published - although rumours suggest it'll be by the summer.

The only new bits of information to emerge this week are that the new system would be contribution/credit based and that the Treasury seems to agree with the principal of a flat state pension - whoopee do.

Contributions and credits suggest that we'll have to make NI contributions to qualify for a flat state pension (probably 30 years, as currently required for a full basic state pension) and that mothers will enjoy credits towards when not working to look after children under 12.

There's also the issue that the Government might not be able to push through the plans (when they're eventually agreed) before the next election, which is due by June 2015. If it fails to get the core elements of this new system in place and get re-elected then a new government could scrap the whole idea - especially as Labour introduced the current means-tested system.

For now, we'll just have to carry on watching this (very blank) space...

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