Press release

Government publishes draft Bill on Single Tier pension reforms

The majority of people in today’s workplace reaching State Pension age in the coming 40 years will receive a higher state pension.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The majority of people in today’s workplace reaching State Pension age in the coming 40 years will receive a higher state pension over their retirement due to the new Single Tier figures published today show.

Released as part of the Impact Assessment on the Single Tier, they also show that over half of over-25s will receive more state pension income during retirement than they would do under the current system. In the 2020s, three-quarters of all new people retiring will receive a higher state pension after its introduction, in 2040s around two-thirds will be better off.

The Government today also published draft legislation on the plans to reform the state pension.

Steve Webb, Minister for Pensions, said:

We’re doing the right thing by today’s workforce with our reforms. The majority of over 25s will get more, not less, income during their retirement under Single Tier.

We’re also doing the right thing by younger people, giving them a simple, clear state pension, and the right to a workplace pension on top, with a contribution from their employer and the Government.

The reforms, planned for April 2017 at the earliest, will particularly benefit women taking time out to bring up a family, low earners, and the self-employed whose National Insurance contributions will for the first time count towards a full Single Tier pension of £144.

Without the Single Tier reforms, spending on state pensions and pensioner benefits will rise from 6.9 per cent of GDP in 2012/13 to 8.5 per cent in 2060/61. These changes mean the increase will slow to reach 8.1 per cent in 2060, ensuring the state pension remains sustainable for future generations.

By the time young people in today’s workforce and those currently at school retire, most should have built up their own workplace pension, due to the new duty for employers to automatically enrol staff. They will also be clear about what they will get from the state, rather than relying on the current, overly-complex and unpredictable system of means-testing and additional state pension.

Married couples and civil partners will also benefit from the introduction of Single Tier, with each individual earning a state pension in their own right above the level of basic means-tested support. Under the current system a pensioner household that qualifies for basic means-tested support (the Guarantee Credit) will get £217.90. Under Single Tier, a married couple would together receive £288 a week in state pension as long as they have both earned 35 qualifying years.

The DWP figures show that by 2060 the poorest pensioners stand to benefit the most. Over 60 per cent of those getting the least in retirement will gain under Single Tier.

The draft Pensions Bill will include proposals for:

  • a minimum qualifying period to qualify for a pension, meaning it will not be possible for someone to come from abroad, work for a handful of years and receive a payment from the British Government for the rest of their lives. The minimum qualifying rule will mean that by 2040 almost 400,000 people living overseas (outside the EEA) will not qualify as a result of the reforms.
  • a framework for regular, independently-led reviews of State Pension age;
  • the simplification of the current complex system of bereavement benefits through the introduction of the Bereavement Support Payment;
  • measures to strengthen existing private pensions legislation.

Also being published alongside the draft Bill is the previously announced consultation on Protected Persons Regulation.

Notes to Editors:

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Published 18 January 2013