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Government to raise state pension and end means-testing


The Government is to create a universal state pension of £140 a week, eliminating the current means-tested system.

The plans, set to be announced in a green paper later this year, look set to combine all current elements of the state pension, including the basic state pension and the state second pension, into one payment above the current level of pension credit. The move would address the wide-spread concerns raised that Nest would be undermined by means-testing.

Currently, a single person can receive £97.65 a week and a couple £156.15, with extra means-tested payments to the poorest pensioners leading to single person payouts of up to £132.50. Under the new regime a single person could receive £7,280 a year and a couple £14,560.

The Government believes it can save £6bn by cutting the bureaucracy around means-testing, according to reports.

Pensions minister Steve Webb (pictured) has long campaigned for a citizens’ pension.

A Department for Work and Pensions spokeswoman says: “We will be bringing forward proposals for reform in a green paper later this year. Our aim will be a simple, decent state pension for future pensioners, which is easy to understand, efficient to deliver and affordable.”

The Saga Group director general Ros Altmann says; “After years of watching our pension system falling apart, it seems that the Coalition Government’s new Pensions Minister, Steve Webb, may finally be getting to grips with the inadequacies of the UK state pension.”


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There are 21 comments at the moment, we would love to hear your opinion too.

  1. Does this mean that those people who have built up benefits under SERPS/S2P are now subsidising low earners? All very socialist to me. How many people now wish they had contracted out?

  2. I have no problem with Socialist policies and I have remained contracted out despite advice to the contrary.

  3. with reference to the first two posts – my first rule of investing is-

    NEVER give money to the government unless legally required to do so!

  4. Great News (socialist in docrine or not). All we need now is more simplification to the private pension arrangements and the population at large will begin to understand them and then contribute voluntarily. From an adviser point of veiw the CII pension exam will be easy to pass although they will still make it 2hours duration and filled with questions, some even relating to pensions?

  5. This pensions Idea is great. I have no objection to Lord Sugar being paid £250 winter fuel allowance if the cost of means-testing means that it costs more not to pay him! Can you image having any personal insurance policy you have paid into for years being means tested? I only object to the fact that I received the full amount initially, but when my wife reached 60 she was automatically paid half, without even consulting me! The most important thing is that the Government of the day stops p*****g about with our pensions.

  6. So, the ConDemers plan to raise the state pension from the current £97 to £140 a week for everyone by 2015. Sounds fantastic eh – another 40 quid a week ! Very good news for some married couples where the wife doesn’t qualify for a full state pension in her own right of course but not as good as it looks for anyone who does qualifiy for a full state pension or anyone who already gets the full pension credit top-up (which will be abolished at the same time and which in any case makes the state pension up to about £132 a week at the moment). Why not ?

    Because by 2015 the SP will probably have been indexed to around £120 a week anyway so in reality it’s more like a £20 increase. Then you have to take 5 years RPI inflation off that 20 quid to relate it to today’s prices which makes that £20 actually “worth” more like £15 a week by 2015. Most of us will pay 20% tax on our State Pensions so that makes it about £12 a week net. Also SERPS/ SSP is likely to be abolished. Smoke and mirrors

  7. Very good Steve – but on the other side they are going to link the increase to AWE I think they now call it. So that could be fairer.
    But for those that stayed out of SERPS and S2P well done!

  8. Thank you Steve.

    Perhaps you should apply for Ros Attmanns job? Her opinion suggests the government is open.

    The mirror will always tell the truth

  9. Do these government officials talk to each other?

    Muppets, the lot of them.

  10. In the interest of fairness the State Pension should be cancelled for all Members of Parliament, House of Lords, Senior Judges and anybody on a executyive Civil Service state funded employment pension.

    Their reward from the State, means they do not need Winter Fuel Allowance or a State Pension.

    The massive saving could be used to fund Overseas Development.

  11. Removing new retirees from the embarrasing and humiliating means-testing regime will be a massive, positive step. At last a government understands the clash between self provision and state dependence! We should now see a huge increase in elder homeowners sensibly spending their property wealth in taking equity release plans.

  12. At long long last a simple and fair way of paying those who pay into the system a basic pension on which to add to voluntarily by private pension provision.

    Means testing pension income was and is a complete disaster and rewards those who choose not to save for their retirement.

    If implemented, this will end the debate on whether to bother saving for retirement or whether to fall back on the taxpayer.

    An excellent idea and for once a common sense idea pensions proposal from a UK Government.

  13. I wonder how many claims were found in favour of those who were contracted out and whether the ones who were advised to stay in SERPS now have a claim?

    Politics is bust.

  14. I admit that quite a few advisers should brush up on things but when you see the government rearring the pensions system at the stroke of a pen you wonder what value there is an a CII exam based on what applied yesterday.


  15. Sorry to be negative, but I see this announcement as just a sop to NEST. Unless means-testing is abolished, best advice to the vast majority of potential auto-enrolees into a NEST scheme would have to be to opt out a.s.a.p. and direct their contributions to an ISA.

    How many people outside the industry are even aware of means-testing and the fact that it could entirely negate the value of the retirement fund they’re slowly accumulating at the rate of £100 p.m? Virtually none, I’ll bet.

    But talk to people about Crash Gordon’s tax raid on pension funds and the annuity trap and a heck of a lot more people will know just what you’re talking about. That was why they either haven’t started a pension plan or have stopped contributing to the one they already had.

    Yes, the removal of this conflict is welcome, indeed absolutely essential. But, on its own, it isn’t going to reignite the UK’s savings culture and NEST, with an AMC of 2% + a percentage for admin and still, as yet, no investment manager, is going to flop anyway. At best, we’ll see private sector alternatives to NEST, but they won’t be as stupidly cheap and crappy as stakeholder ~ this time round, the providers simply won’t stand for it.

    So what’s the big deal?

  16. Can someone tell me how this will affect me? I am on incapacity benefit for life but have opted out of Serps. Will I still get the small nest egg this has accumulated in a protected rights pension or what? Will this be over and above the £140?

  17. wonder what will happen to those who bought past years ? made voluntary contributions or who have deferred taking their pension ?

    I hope this will be thought out before they make any changes. any solution will need to be phased in very slowly applying perhaps only to those who retire in future at age 66 thru 75

  18. Good news in principal, but the numbers say that by the time the higher payments are made the true gains will be watered down. Sounds like an excellent re-election ploy to me. In addition, it also raises the profile of the UK offering some of the most generous state benefits in the EEA. I am sure that this will encourage more EEA citizens to join us.

  19. I agree with Steve 24 October – My husband receives full state pension and I receive partial state pension -I and many other couples where the woman has worked will be worse off under these new proposals. –

  20. Does anyone believe the politicians when they go vote hunting with the suggestion that means testing will end for state pensions. They are liars. If anything, more means testing will be the order of the day. The state pension pot is being rapidly depleted because civil servants use the same pot for their employment related pensions. They should have their own plan with their own contributions, not be supported from the tax funded plan. This whole issue is a big scam that has been milked by consultants and civil servants.

  21. I retire on my 65th birthday on 5th april 2014 .

    Can I delay my retirement by 1 year & get the benefit of the £140 per week pension

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