Azara Blog: The government might have a uniform state pension

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Date published: 2010/10/26

The BBC says:

The government is planning a "very radical" overhaul of the state pension, Business Secretary Vince Cable says.

He did not confirm newspaper reports that it could rise from about £97 a week for a single person to £140.

But Mr Cable said the proposals, such as replacing means-tested pension credits with a flat-rate payment, would ensure a "decent" retirement.

Critics said it sounded "too good to be true" and unaffordable, despite savings in administration costs.

At the moment, pensions are topped up to £132 a week for the poorest, through the means-tested pensions credit.

But Lib Dem pensions minister Steve Webb, who has come up with the proposals, wants to scrap the existing system and replace it with a flat rate of £140 a week for everyone.

The changes would particularly benefit those who have paid less into National Insurance. Some women who currently fail to qualify for the full basic state pension because they have stopped working to raise children and therefore lack enough NI contributions.

The reform would be paid for, in part, by savings in administration costs when means testing is scrapped.

This is about the first sensible idea put forward by the LibCon government. On the other hand, it's not obvious it will ever come to fruition, and could just be a PR exercise to blunt some of the coverage about government cuts. And it is not totally trivial to implement, since presumably it would have to be based somehow on residency. Anyway, if it ever happens, then it's yet another reason why NI should be scrapped (and replaced with income tax increases).

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