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| State pension: The overhaul and you | State pension: The overhaul and you |
| (40 minutes later) | |
| By Kevin Peachey Personal finance reporter, BBC News | By Kevin Peachey Personal finance reporter, BBC News |
| When the state pension was introduced in 1909, the maximum payment was five shillings (25p) a week - the equivalent of about £20 today. | When the state pension was introduced in 1909, the maximum payment was five shillings (25p) a week - the equivalent of about £20 today. |
| Just over 500,000 old and poor people queued up to receive it. They had to be at least 70 years old, have an income of less than 12 shillings a week and not have too much furniture, which was judged as a sign of wealth. | Just over 500,000 old and poor people queued up to receive it. They had to be at least 70 years old, have an income of less than 12 shillings a week and not have too much furniture, which was judged as a sign of wealth. |
| Now, plans are being drawn up for a major overhaul of the state pension, so everyone of state pension age gets the same amount each - some £140 a week, according to newspaper reports. | Now, plans are being drawn up for a major overhaul of the state pension, so everyone of state pension age gets the same amount each - some £140 a week, according to newspaper reports. |
| So how would this change the current system and how would it affect you? | So how would this change the current system and how would it affect you? |
| How is the state pension run at the moment? | How is the state pension run at the moment? |
| Those who qualify for a state pension currently start to receive payments at 60 for women and 65 for men. | Those who qualify for a state pension currently start to receive payments at 60 for women and 65 for men. |
| The full rate for a single person is £97.65 a week. | The full rate for a single person is £97.65 a week. |
| However, there is also an additional means-test which tops up the pensions of the less wealthy. | However, there is also an additional means-test which tops up the pensions of the less wealthy. |
| This additional amount is called the Pension Credit, or Minimum Income Guarantee, for those in Britain. Those who qualify are guaranteed a weekly minimum £132.60 for a single person and £202.40 for couples. | This additional amount is called the Pension Credit, or Minimum Income Guarantee, for those in Britain. Those who qualify are guaranteed a weekly minimum £132.60 for a single person and £202.40 for couples. |
| But is it correct that not everyone gets these payments? | But is it correct that not everyone gets these payments? |
| Yes. Your state pension depends on how long you have worked and the number of National Insurance qualifying years you have. | Yes. Your state pension depends on how long you have worked and the number of National Insurance qualifying years you have. |
| If you reached the state pension age on or after 6 April 2010, you need to have 30 qualifying years for a full basic state pension. | If you reached the state pension age on or after 6 April 2010, you need to have 30 qualifying years for a full basic state pension. |
| If you reached the pension age before April this year, then a woman with a working life of 44 years needs 39 qualifying years for a full pension, and a man with a working life of 49 years needs 44 qualifying years to get the full amount. | If you reached the pension age before April this year, then a woman with a working life of 44 years needs 39 qualifying years for a full pension, and a man with a working life of 49 years needs 44 qualifying years to get the full amount. |
| If you are in a couple, and only one person in a couple qualifies for the basic state pension, then the couple will still receive a minimum of £156.15 a week. | If you are in a couple, and only one person in a couple qualifies for the basic state pension, then the couple will still receive a minimum of £156.15 a week. |
| Currently, those aged 80 and over, who do not qualify for a basic state pension, get a non-contributory pension of £58.50 a week as long as they fulfil factors such as residency requirements. | Currently, those aged 80 and over, who do not qualify for a basic state pension, get a non-contributory pension of £58.50 a week as long as they fulfil factors such as residency requirements. |
| There seems to be quite a lot of paperwork there? | There seems to be quite a lot of paperwork there? |
| And there is more. The means-test actually puts some people off the top-up they are entitled to. | And there is more. The means-test actually puts some people off the top-up they are entitled to. |
| Some 1.6 million people could claim the extra money through Pension Credit but are not receiving it, according to estimates. | Some 1.6 million people could claim the extra money through Pension Credit but are not receiving it, according to estimates. |
| Others also receive the State Second Pension - or Serps - which is the government's earnings-related additional pension. | Others also receive the State Second Pension - or Serps - which is the government's earnings-related additional pension. |
| What do we know of the latest proposals? | What do we know of the latest proposals? |
| Not a huge amount at the moment. However, we do know that there is a discussion paper, drawn up by Pensions Minister Steve Webb. | Not a huge amount at the moment. However, we do know that there is a discussion paper, drawn up by Pensions Minister Steve Webb. |
| This aims to simplify the system by getting rid of all the means-tested sections entirely and instead to pay a flat rate to everyone. | This aims to simplify the system by getting rid of all the means-tested sections entirely and instead to pay a flat rate to everyone. |
| Clearly this would save money in terms of bureaucracy, allowing a bigger standardised payment. | Clearly this would save money in terms of bureaucracy, allowing a bigger standardised payment. |
| But the big driver is the greater opportunity it offers those who have stopped work to look after children - usually women - who have not built up enough National Insurance qualifying years under the current system. | But the big driver is the greater opportunity it offers those who have stopped work to look after children - usually women - who have not built up enough National Insurance qualifying years under the current system. |
| Who else wins, if these changes happen? | Who else wins, if these changes happen? |
| As well as women, those who have built up quite big savings for their retirement could be better off. | As well as women, those who have built up quite big savings for their retirement could be better off. |
| This is because these savings are considered, at present, in the means-testing for Pension Credit. | This is because these savings are considered, at present, in the means-testing for Pension Credit. |
| However, without more detail on the figures - especially on how this could be afforded - we cannot be sure whether everyone will be better off. | However, without more detail on the figures - especially on how this could be afforded - we cannot be sure whether everyone will be better off. |
| Certainly, the reported plan for a basic state pension of £140 would push up many people's income - but we do not know if that is £140 at today's prices, or when such a plan might be implemented some time after 2015. | Certainly, the reported plan for a basic state pension of £140 would push up many people's income - but we do not know if that is £140 at today's prices, or when such a plan might be implemented some time after 2015. |
| There would be much discussion on whether a millionaire getting the same state pension as somebody on the breadline is fair or not, although this income would be taxed. | |
| Bear in mind too that the state pension age is rising to 66 for men and women by 2020. | Bear in mind too that the state pension age is rising to 66 for men and women by 2020. |
| Has there been much reaction to the plans? | Has there been much reaction to the plans? |
| Labour says that people get a similar amount already by qualifying for Pension Credit. | Labour says that people get a similar amount already by qualifying for Pension Credit. |
| Shadow work and pensions minister Douglas Alexander says the discussion masks the fact that many pensioners will be hit by the fall-out from the Spending Review and the impending rise in VAT to 20% in January. | Shadow work and pensions minister Douglas Alexander says the discussion masks the fact that many pensioners will be hit by the fall-out from the Spending Review and the impending rise in VAT to 20% in January. |
| The National Association of Pension Funds (NAPF) describes the UK's state pension as the "worst in Europe", and says it would welcome simplification and less bureaucracy. The coalition government's plan is similar to one which has been promoted by the NAPF. | The National Association of Pension Funds (NAPF) describes the UK's state pension as the "worst in Europe", and says it would welcome simplification and less bureaucracy. The coalition government's plan is similar to one which has been promoted by the NAPF. |