The government has today outlined plans to simplify the state pension.
The new Single Tier pensions system will provide certainty so people know what they will get from the state and make it easier for people to plan and save.
It will strip away add-ons and means testing to offer people a full state pension set above the means test (currently £142.70), based on 35 years of National Insurance contributions.
Appearing on ITV’s Daybreak, David Cameron explained that the new system will be simpler and will benefit women, low earners and the self-employed.
The current system is too complicated; it also discourages saving because there’s so much means testing. And also it’s not particularly fair on women, because if you take a career break you find it difficult to build up a decent pension. So the idea here is that for new pensioners in 2017 instead of the £100 or so basic state pension, it’ll be over £140.
A single State Pension cuts out a lot of the means-testing and also will help a lot of women, a lot of low-paid people who otherwise wouldn’t get a decent state pension.
Under the present system, women, low earners and the self employed have found it hard to get past the basic state pension level of £107.45.
Nearly 3 million women get a state pension of £80, which compares to 450,000 men.
But when the Single Tier pension is introduced, 750,000 women will get an extra £9 a week in its first 10 years. And by 2040 it is expected that 80% of all people will get a full state pension.