Chancellor George Osborne has announced that the government will introduce a single-tier state pension of around £140 per week.
The new system, which was originally mooted by pensions minister Steve Webb last year, will be introduced early in the next Parliament. It will be set above the mean-tested pensions credit and, as set out in the green paper published by the Department for Work and Pensions (DWP), the single-tier pension will cost no more than the current state pension system in every year.
Raj Mody, partner and head of the pensions group at PricewaterhouseCoopers, said: “True simplification has to be good news for savers and pensioners. Having a simple and clearer idea of what base level of state pension can be expected will be a good starting point for building their further savings on top of that.
“However, expectations need to be realistic. With the links between state pension age and life expectancy we can see the state pension age easily being 70 by 2050. A newborn today may not expect to see their state pension until past age 75.”
The government will provide more detail on the single-tier pension in a white paper to be published in spring 2012, with final decisions on the detailed implementation of the policy being taken at the next spending review.
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