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

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Lord Sainsbury pulls funding from Progress and other political causes

The longstanding Labour donor will no longer fund party political causes. 

Centrist Labour MPs face a funding gap for their ideas after the longstanding Labour donor Lord Sainsbury announced he will stop financing party political causes.

Sainsbury, who served as a New Labour minister and also donated to the Liberal Democrats, is instead concentrating on charitable causes. 

Lord Sainsbury funded the centrist organisation Progress, dubbed the “original Blairite pressure group”, which was founded in mid Nineties and provided the intellectual underpinnings of New Labour.

The former supermarket boss is understood to still fund Policy Network, an international thinktank headed by New Labour veteran Peter Mandelson.

He has also funded the Remain campaign group Britain Stronger in Europe. The latter reinvented itself as Open Britain after the Leave vote, and has campaigned for a softer Brexit. Its supporters include former Lib Dem leader Nick Clegg and Labour's Chuka Umunna, and it now relies on grassroots funding.

Sainsbury said he wished to “hand the baton on to a new generation of donors” who supported progressive politics. 

Progress director Richard Angell said: “Progress is extremely grateful to Lord Sainsbury for the funding he has provided for over two decades. We always knew it would not last forever.”

The organisation has raised a third of its funding target from other donors, but is now appealing for financial support from Labour supporters. Its aims include “stopping a hard-left take over” of the Labour party and “renewing the ideas of the centre-left”. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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