Ministers are drawing up plans to sweep away the current means-tested system and introduce a new flat-rate pension which would replace the basic state pension, the second state pension and pension credit.
At a £140 a week, the new ‘universal’ pension would be worth considerably more than the present basic state pension of £97.65 a week for a single person and £156.15 for a couple. On top of this means-tested top-ups ensure the poorest single pensioners have an income of at least £132.60 and couples get £202.40.
Ministers claim that scrapping the present complicated and expensive system is expected to save enough money from reduced bureaucracy to pay for the new pension and that the move would benefit everybody in retirement, including the better off.
It seems the new system would probably be based on residency in Britain and not on National Insurance contributions.
The proposed new system would particular benefit women, many of whom lose out on the current state pension arrangements after taking time out of work to bring up children.
Ministers are planning to publish a Green Paper before the end of the year, which will be followed by a consultation on the proposals. They hope to implement the new system before the end of this Parliament in 2015.