Government Announces State Pension Shakeup

The UK government announced plans yesterday for a major overhaul of the pensions system. Speaking at a conference for the charity Age UK, Work and Pensions Secretary Ian Duncan Smith revealed the details of the plan, which is expected to result in a flat payment of £140 to every pensioner.

The reforms are designed to cut waste by simplifying the system, which currently has a separate rate for couples than individuals. The changes also suggest a move away from means testing, which Mr Duncan Smith claims unfairly penalises savers, discouraging people from saving for their retirement. By putting an end to means testing and introducing a single universal payment the government will be able to cut costs whilst fairly rewarding those who save, he claimed. 

 "The state pension system is so complex that most people have no idea what it will mean for them now and in their retirement. And too many people on low incomes who do the right thing in saving for their retirement find those savings clawed back through means-testing. We have to change this. We have to send out a clear message across both the welfare and pension systems: you will be better off in work than on benefits, and you will be better off in retirement if you save."

The announcements were not without criticism however, as Labour accused the government of making “vague promises.” Rachel Reeves, shadow secretary for work and skills said: “Labour supports a fairer, simple state pension system. But we want to see the detail - who will be better off and who worse off under this system?”

The pension age is set to rise to 66 by 2020 following the government spending review announced last autumn.