The Government looks set to introduce a £140 flat-rate, single-tier state pension after respondents to the consultation overwhelmingly backed the proposal.
The Government’s green paper on state pension reform, published on April 4, outlines two potential reform options.
The first is an acceleration of the previous administration’s plans, so the state second pension would move to a flat rate by 2020.
The second “more radical” option would see the introduction of a single-tier state pension of around £140 at today’s prices for future retirees.
The DWP says more than three-quarters of organisations that responded to the consultation favoured the second option in principle, with most saying it would better complement automatic enrolment.
Pensions minister Steve Webb says: “In spite of our best efforts to encourage take-up, pension credit has failed to reach over a million low-income pensioners who are entitled to help. We want reform to create a simpler state pension that will not leave people relying on means-testing to make ends meet.”
The Pensions Policy Institute says introducing a flat-rate, single-tier state pension worth £140 would be “broadly cost-neutral”, costing less than the current system by 0.1 per cent of GDP between 2019 and around 2050, and costing more that the current system by 0.1 per cent of GDP by 2055.
Hargreaves Lansdown head of pensions research Tom McPhail says: “Option two will be more problematic to deliver than option one, not least because it would require the abolition of contracting out for defined-benefit schemes, but it would result in a simpler state pension system on which individuals could build their private savings.”
Ministers will consider the feedback before bringing forward reform proposals.