IDS moves to streamline pensions

Iain Duncan Smith will outline sweeping changes to state pensions later today.
Iain Duncan Smith will outline sweeping changes to state pensions later today.

By Hannah Brenton

The coalition will "fundamentally simplify" the pensions system, Iain Duncan Smith will say today.

In a speech to Age UK, the work and pensions secretary will outline sweeping changes to state pensions and announce plans to introduce a flat-rate of over £140 per week.

Mr Duncan Smith will call for a pensions system in line with welfare reform, encouraging people to save more.


The government's welfare changes were designed to "make work pay" more than state benefits. Pensions reform will be influenced by a similar mantra: "It pays to save".

Under current rules, the weekly pension flat-rate is £97.65, which can then be boosted by up to £132 through means-tested add-ons for the poorest OAPs.

The new scheme will scrap means-testing and provide the same rate for men and women.

The government says this is a boost for women who currently receive a lower state pension if they took time out to raise children.

Mr Duncan Smith is expected to say the current system is too complex, while means-testing disincentives to saving.

"The state pension system is so complex that most people have no idea what it will mean for them now and in their retirement," he will say.

"And too many people on low incomes who do the right thing in saving for their retirement find those savings clawed back through means-testing.

"We have to change this. We have to send out a clear message across both the welfare and pension systems - you will be better off in work than on benefits, and you will be better off in retirement if you save."

The government has already announced reforms to scrap the compulsory retirement age and require employers to automatically enrol staff in private pension schemes.

Mr Duncan Smith will say reform is necessary to maintain a stable system for the next generation.

"Too often we forget that this isn't just a system for those who are currently retired, but also for those who will need it in the years ahead," the work and pensions secretary will say.

"That is why, together, we must make it work not just now but down through the generations, and make sure we leave hope and stability for those generations to come."

Michelle Mitchell, director of Age UK, welcomed the proposals.

"Sweeping simplification of the state pension system is needed so that everyone can expect a decent, flat-rate pension, set at a level high enough to help most people avoid poverty without recourse to means-tested benefits," she said.

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