£140 flat-rate pension unveiled
New plans to create a flat-rate £140-a-week state pension have been unveiled by Work and Pensions Secretary Iain Duncan Smith.
Mr Duncan Smith said the new system will replace the existing handouts, which pays a minimum of £97.65 a week with the rest means tested, which he branded complex and in "crisis".
The proposals are an attempt to encourage more people to save for their retirement and come ahead of the introduction of an automatic enrolment scheme for work-based pensions next year.
The changes will see means-tested credits, which see nearly half of all OAPs claim £132.60 a week, scrapped in about five years' time.
Mr Duncan Smith said pension credits currently acted as a "disincentive" to save.
He said that in order to meet European regulations, men and women would retire at the same time. The age would rise to 66 for both sexes by 2020 - a move which could bring £14 billion into the Treasury's coffers.
The proposals are likely to benefit mothers who currently lose out on their pensions for having taken a career break to raise their children.
Pension experts have warned that unless a universal state pension is introduced the Government could face a massive pensions mis-selling scandal in future years.
The problem is that people on low incomes, who saved only modest amounts towards their retirement, could find that they miss out on means-tested benefits that they otherwise would have qualified for, meaning they would have been better off not saving into a pension at all. The changes should mean that it always pays to save for your retirement.
Copyright © Press Association 2011
Find Your Financial Consultant