The Government is to embark on a fundamental overhaul of the pensions system to ensure it "pays to save" for retirement, Iain Duncan Smith will say today.
The Work and Pensions Secretary will signal a move towards a flat-rate state pension.
Speculation is rife the flat-rate amount will be £140 a week, though the Government is not excepted to announce a figure today.
The present full basic state pension is £97.65 a week, topped up to £132.60 a week by pension credit for those who do not reach that threshold via other income.
Some also qualify for a second state pension, usually a much lower sum than the basic pension.
In a speech to Age UK at 3pm today Duncan Smith will say the existing state pension is too complex and means-testing for pensioners discourages many people from saving for retirement.
He will argue pensions require the same kind of simplification he is bringing to the benefits system through the Universal Credit.
"We have to fundamentally simplify the system. And we have to make it crystal clear to young savers that it pays to save," Duncan Smith will say.
He will warn that younger workers are becoming "increasingly cynical" about saving and will not be able to afford a "stable and secure" retirement unless the Government does "something radically different".
Pension age to rise
The state pension age is already set to be increased in response to people living longer, and the default retirement age of 65 is to be abolished in October, so employers can no longer sack staff who reach that threshold.
From next year, the Government will force employers to enrol staff automatically in a private pension scheme to boost individual savings for retirement. Staff can opt out, however.
Duncan Smith will say that that is not enough and the Government has to look at state provision as well.
"Auto-enrolment cannot solve the savings challenge on its own, and we have to be prepared to look at the other side of the equation. We now have to look at the state pension," he will say.
"The state pension system is so complex that most people have no idea what it will mean for them now and in their retirement.
"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."
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