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Pensions: Your questions answered

PUBLISHED: 07:21 09 March 2011

What changes are the government planning?

The aim is to replace the current basic state pension and the means-tested top-ups, such as the pension credit, with a single flat-rate pension. Full details are not yet known but it is thought the new system will not penalise women who take time out of work to look after children. People currently need to have paid national insurance contributions for 30 years in order to qualify for full basic state pensions. It has not been announced how much people would receive each week, but it is speculated that it would be about £140. Single people who currently receive full state pensions and pension credit get £132.60.

Why is the government planning to do this?

The change is part of plans to overhaul and simplify the benefits system generally. The existing system can be very complicated. The government also wants to create greater certainty about how much people will receive from the state, to help people plan for their retirement.

Who is going to benefit most from this?

The biggest winners are going to be women, who often take career breaks to look after young children. Under the current system, this can mean that they do not have enough years of national insurance contributions to qualify for full state pensions. People who would qualify for means-tested benefits under the current system could also be winners, as there is evidence to suggest that many people who are entitled to pension credit do not claim it, as they think the process is too complicated or they are uncomfortable with the idea of receiving extra handouts. The move should also make retirement planning easier for everyone.

What will happen to people who are already drawing their state pension?

The changes are aimed at the next generation of pensioners, and it is thought that those who have already retired will not be affected.

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