Government reconsidering £140 State Pension plan
The Government is having a rethink of its plans to introduce a flat-rate £140 State Pension.
According to a report in the Financial Times, the Government has only just realised that many people will lose out – or at least not benefit – from the changes. As a result, Prime Minister David Cameron has put the brakes on the reforms.%VIRTUAL-SkimlinksPromo%
The table below outlines the Basic State Pension various people can qualify for:
However, there's also an additional State Pension to think about. It's had all sorts of different names in the past, including State Earnings-Related Pension Scheme, and is money from the Government on top of the State Pension. How much you get depends on your earnings.
And then there's Pension Credit, which is available to poorer pensioners, and bumps up the State Pension to nearly £140 a week.
- What are the ten pension mistakes millions of Britons make?
- Top 10 retirement tips - special 16-page guide
The whole system is complicated and confusing, which is why the idea of a single flat rate was a popular idea.
The planned reforms
Under the reforms, the second State Pension element would be ditched entirely, with the State Pension bumped up to £140 a week.
Not everyone benefits
The problem with the planned reforms is that there will be losers. For starters, existing pensioners won't qualify for the flat rate. And given older people are far more likely to vote than younger people, the Government clearly feels uneasy about angering them, particularly after the Granny Tax farce earlier this year.
Those who previously would have benefitted from the additional State Pension are also unlikely to be big fans of the reforms.
What happens now?
It's no secret that the Government has been concerned about the cost of welfare reform.
That's why the Prime Minister supposedly tried to move Iain Duncan Smith, the Secretary of State for Work and Pensions, in the reshuffle.
Back in July the Government announced the White Paper on pension reform had been postponed until the autumn. That paper is still expected to be published, though reports suggest it will be "consultative rather than prescriptive", highlighting alternative options.
- 'Rethink' on pension reform plans
- Over 50s pensions shortfall of £70k each
- Workers 'unaware' of pension change
- Find out the 10 tips to improving your pension