Department for Work and Pensions
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Simplifying the state pension
The amount of state pension money paid out to pensioners can differ by more than £200 a week – that’s a difference of £10,000 a year. This is because the level of basic and additional state pension payouts can vary so much in the current system.
According to the latest DWP administrative data, state pension income varies from around £7 a week to £230 a week. Around 130,000 people get £7 or less a week and the same number of people get £230 or more a week.
State pension regulations have multiplied so much over recent decades and made the system so complex that people have no way of working out what they will get a week, and can’t budget properly for their needs.
Pensions Minister Steve Webb said:
“The range of state pension payouts at the moment is simply staggering. The current system is so complex and would baffle even Einstein. 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 pension will restore simplicity and give people certainty instead of chance. And it will provide a sure foundation for further saving.”
The current state pension is made up of the basic state pension and various additional state pension entitlements.
It will be replaced by a simple flat-rate state pension for new pensioners set above the level of the means test, currently estimated at around £140 a week.
A White Paper will set out further details later this year.
Notes to Editors
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The source of these figures is September 2011 administrative data available at: http://statistics.dwp.gov.uk/asd/index.php?page=adhoc_analysis
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These figures include basic state pension and additional pension, and include state pensions paid in Great Britain and overseas.
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The Chancellor announced in the Budget on 21 March that the Government will reform the State Pensions system to introduce a single tier pension for future pensioners.
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A Green paper, ‘A state pension for the 21st century’, published in April 2011 set out plans for state pension reform including the option of a single-tier state pension.
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