A new flat-rate state pension and a system to automatically increase the retirement age have been announced in the Queen's speech.
Outlining the government's legislative plans for the next session of parliament, the Queen laid out plans that will see an overhaul of the state pension system for new retirees.
Currently the state pension is £107.45 per week and with pension credit this can go up to £137.35.
The new plans propose that this will be replaced by a new flat rate of £140, which, with inflation, is expected to be push up to £155 by 2015. The BBC reports that more than one-and-a-half million eligible pensioners do not claim pension credit, and the government believes that such individual losses of entitlement would not occur under a simpler flat-rate system.
The new plans also include an increase of the state pension age to 66 for both men and women by 2020 and a further increase to 67 between 2026 and 2028 - affecting those aged 52 or younger now.This will be for England, Scotland and Wales only.
The speech also signalled government plans for this state pension age to continue to rise automatically in line with longevity.
On the Public Service Pensions Bill the Queen announced plans that will see public sector pensions switch over to a career average scheme (CARE).
The government says this will make the pensions more sustainable and will see a fairer divide of the costs between employers, workers and taxpayers.
Commenting on the plans, the National Association of Pension Funds (NAPF) said they were "delighted" to hear "the government's commitment to a long-awaited, landmark reform".
Joanne Segars, the NAPF's chief executive, said: "This is another big step towards a simpler, more generous state pension that no longer penalises people for saving. A new system will take millions out of means-tested benefits and will encourage people to take control of their own age by saving towards it.
"The NAPF has been calling for a single-tier state pension for many years. This is the much-needed foundation on which people can build their own savings, knowing that it pays to save. And it will help ensure that auto-enrolment is a success.
"We are all living longer, so it is inevitable that retirement ages move upwards to reflect that. The trade-off for working longer must be a better state pension come retirement."
First published 09.05.2012
azeevalkink@wilmington.co.uk
