Five questions answered on new flat rate pension proposal

Who will benefit, and who will miss out?

The government plans simplify the pension’s system in what will be its biggest overhaul in decades. We answer five questions on the proposed changes.

What new flat rate are the government proposing?

Pensioners after the 6th of April 2017, when the new changes will likely to come into effect, will be paid a flat rate of £144, plus inflation rises between now and 2017. This effectively merges the state basic pension and the state second pension.

The current state pension is £107.45 a week. However, this can be increased up to £142.70 by applying for a pension credit and the state second pension.

Why has the government decided to make these changes now?

The coalition government believes the current system is too complicated and they say they want to simplify the system so people know what they will be paid when they reach pension age.

They government also believe that the one-and-a-half million pensioners who currently don’t claim pension credit they are entitled to will be paid what they are owed under this new system. 

Who sets to benefit the most from these changes?

Those who are self employed are set to benefit as they tend to get a lower state pension as they tend not to qualify for the state second pension. Women are also set to be better off.

As Chris Curry, from the charity the Pensions Policy Institute, explains to the BBC:

"So people who don't make enough contributions throughout their working life to, in particular, the state second pension, which includes people with intermittent work patterns, periods of low earnings and the self-employed," he said.

"So a lot of women will do better from this particular policy, as will people who are spending long periods of their career in self-employment."

Who might miss out on a full pension under the new system?

It is believed the government will announce that anyone who hasn’t paid National Insurance for at least 10 years will not get a pension. Also, those who have paid National Insurance for less than 35 years will have their pension reduced; a change from the 30-year threshold introduced a few years ago.

Also, the state pension age is rising to 66 for both men and women by 2020, with further plans for this to increase to 67 between 2026 and 2028.

What has the pension’s minister Steve Webb said about the proposed changes?

Webb told the BBC: "At the moment, nobody has a clue what the state is going to pay them," he told the BBC.

"We have a basic pension, a second state pension, a pension credit - it's fiendishly complicated. So we are proposing a simple system, not a more expensive one... that will help people plan for their retirements.

"Now, men and women will build up pensions in their own right. And women coming up to pension age who have got a damaged pension record, because they brought up children, will have that restored." 

"At the moment, nobody has a clue what the state is going to pay them" Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

Photo: Getty Images/AFP
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Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.