State pension could rise 40% to £140 a week, reveals Vince Cable

Published on Tuesday 26 October 2010 00:10

THE state pension might be increased to £140 as part of a UK government shake-up to ensure "decent" payments for retired people.

• Vince Cable: "We need something people can rely on"

Under the radical plans being looked at by Business Secretary Vince Cable, the existing state pension could rise by more than 40 per cent from its existing level of about 97 a week for a single person.

The move would see an end to means-testing and the introduction of a flat-rate state pension, which the government hopes would reduce inequalities between men and women and encourage people to save.

But Mr Cable gave no indication of the overall cost of the proposed change - which he confirmed pensions minister Steve Webb had "been working on".

Mr Cable said the government wanted to "get away from what we've had for the past quarter of a century, where state pensions have fallen behind the rest of the economy".

He also confirmed that the Liberal Democrats had looked at the policy when the party was in opposition.

Mr Cable said: "This is a big idea that my colleague, the pensions minister Steve Webb, has been working on and, indeed, we worked on it for years in opposition.

"It's to make sure people can look forward in retirement to a good state pension without means-testing. We need something people can rely on."

Under the current system, the basic state pension is 98 a week for a single person and 157 for a couple. A means-tested top-up ensures that poorer pensioners are paid at least 133, while couples get 202.

The Business Secretary said that the proposed changes, which are scheduled to be published this year, would not happen "overnight", with the pensions department saying there were long-term plans to "improve" the state pension and make it "easy to understand".

Mr Cable said the move "depends on the state of public finances as to how and when this is phased in". He went on to say that the policy being looked at by the pensions minister was "very radical".

Mr Cable's comments came just days after Chancellor George Osborne announced in the Spending Review that the state pension age for both men and women would rise to 66 by 2020 - six years earlier than had been planned by the Labour government.

Mr Cable also said that the UK government wanted to improve pension entitlement for women who take years out of the work environment to bring up children, but are penalised under the current system because they do not accumulate enough contributions to qualify for a full state pension.

He said: "What Steve Webb and his colleagues want to do is, particularly, to protect the position of women who, because they won't be covered by contributions, don't have a proper state pension.

"I think the type of shake-up they're considering will be very good news for pensioners, when we've got the plans worked out in final detail."

The Department for Work and Pensions confirmed that a review was now being held, with the results due to be published later this year. A spokesman said: "The Chancellor has confirmed that the government will improve the quality and accessibility of pensions in the Spending Review period.

"We will be bringing forward proposals for reform later this year," said the spokesman.

"Our aim will be a simple, decent state pension for future pensioners, which is easy to understand, efficient to deliver and affordable."