The basic state pension could be increased to about £140 a week under Government plans to ensure everybody has a "decent" income in retirement.

Ministers are drawing up plans to sweep away the means-tested system and introduce a new flat-rate pension worth considerably more than at present (see the State Pension Boosting guide).

The full basic state pension is currently £97.65 a week for a single person and £156.15 for a couple. This is based on the number of years workers pay national insurance.

Means-tested top-ups for the poorest ensure single pensioners have an income of at least £132.60 a week and couples get £202.40 under the pension credit benefit.

Scrapping the complicated system is expected to save enough money from reduced bureaucracy to pay for the £140-a-week pension, the Government says.

The move has been welcomed by the National Association of Pension Funds. The body's chief executive Joanne Segars says: "The UK's state pension is the worst in Europe, and we really need a simpler, fairer and more generous system.

"Retirement ages are heading upwards, and the trade-off for having to work longer must be a better state pension."

It would be a particular boost for women, many of whom lose out on the state pension after taking time out of work – and therefore paying less national insurance – to bring up children.

Ministers hope to implement the new system before the next general election, scheduled for 2015.

It is being hammered out by Work and Pensions Secretary Iain Duncan Smith and Pensions Minister Steve Webb. A Green Paper is to be published later this year.

'Lib Dem idea'

Business Secretary Vince Cable said today it was a Liberal Democrat idea that had been developed by the party over several years in opposition.

"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," he told BBC Radio 4's Today programme.

"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.

"What he's proposing is very radical. It will take time to introduce."

A new "single tier" pension of £140 a week would give an income of £7,280 per year or £14,560 for a pensioner couple.

The new system would probably be based on residency in Britain and not on National Insurance contributions.

A spokeswoman for the Department of Work and Pensions says: "The Chancellor has confirmed the Government will improve the quality and accessibility of pensions in the Spending Review period.

"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."

Additional reporting by Guy Anker.

Further reading/Key links

Pension help: State Pension Boosting
Best rates: Top Savings, Top Fixed Savings
Stay safe: Safe Savings

On Our Forums

State pension could rise