'We are clearing up the mess of the state pension system'
AFTER decades of tinkering by successive governments, we are restoring clarity and clearing up the mess of the state pension system.
My first act on becoming Pensions Minister in 2010 was to help existing pensioners. I restored the link to earnings that was broken in the 1980s, and in so doing we boosted the incomes of millions of older people.
We are now planning a simpler state pension for new pensioners from 2017.
The "single tier" pension will be one flat rate, set above the level of the basic means-test and payable after 35 qualifying years of National Insurance (NI) contributions.
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This will be a state pension fit for the 21st century and much better suited to the way we live and work today.
Last year, I introduced a duty on employers to enrol staff into a workplace pension.
Millions more people will now have a chance to save into a pension, many for the first time, and get a contribution from their employer.
These reforms represent the biggest change in the world of pensions for more than a century. And it is long-overdue.
For decades, Britain has muddled on with not one but two state pensions.
The first is a basic state pension, which is far from "basic". Complicated rules exist for people who become divorced or widowed. Special arrangements for married women date back to times when men were given pensions and women were simply thought to need husbands!
The second is a state earnings-related pension, previously known as Serps, but now called the state second pension.
This scheme is mind- boggling, with variable amounts paid out according to past earnings and the fact some people can opt out and rely on their workplace pension scheme.
And still many people don't build up enough from these pensions combined, so additional and complex means-testing provides a top-up.
In the new system, every- one will qualify for a pension in their own right, doing away with archaic rules about claiming pensions based on someone else's NI contributions.
Like today, people with caring responsibilities will have those years recognised.
Both mean women who have spent time at home bringing up children will benefit. Three-quarters of a million women reaching state pension age in the first ten years after the new state pension is introduced will receive on average £9 a week more than they would because of the way the new pension will be calculated.
Britain's 4.3 million self- employed people, whose NI contributions do not currently count towards the Second State Pension will also benefit. In future they will be able to qualify for the full amount of single tier pension.
Overall, more than half of Britain's over-25s will receive more state pension income during retirement as a result of these reforms.
The first step to being financially secure in later life is knowing what you can expect to get as a minimum. The second is being rewarded for saving on top, not penalised.
So you can start planning for the rest of your life.