Thursday, 9 May 2013

'Flat-rate' pension that is not for everyone


'Flat-rate' pension that is not for everyone

Following yesterday's Queen's Speech, I couldn't find any details about the proposed flat-rate pension on the DWP website today so I rang them.  I was told that until it becomes Law, it is still a proposal, hence the reason for no details, even about the exact amount.

From advance publicity it might be assumed that everyone reaching pensionable age from 2016 will receive around £140, but this isn't the case.  And this new innovation is meant to simplify the pension system making individual assessment unnecessary.  This isn't the case either.

Those with 35 qualifying years will get the full flat rate.  Others will get a percentage.  The example I was given was that 26 qualifying years will yield a pension of 26 x 3/55ths.  So it isn't a simple flat rate across the board for all new pensioners, it is still based on what you've put in, or rather what you haven't put in.

I have never seen it stated that the new pension would go up each year at the lower rate of inflation, but I was told that this will be the case.

So now we can watch the proposed flat-rate pension make its way through Parliament.  Shouldn't 'flat rate' mean that the rate applies to everyone? Well in this case the term is misleading and many pensioners, who will in any case be waiting longer for their pensions,  will be getting less than others.  The "flat rate" will still have to be assessed for each individual. Most existing pensioners will be getting substantially less than the flat-rate and will never catch up.  Since April 2013 the current basic state pension is £110.15 after a rise this year of 2.5% which equals £2.70.

Government simplification of the system? Government sorting things out? Government fairness? But why should it be any different from anything else they do?