Briefing Notes

Briefing Note 59 - What could be the implications of the Government's proposed state pension reforms?

The Coalition Government has launched a Green Paper to consult on possible reforms to state pensions that could significantly change the structure of the current pension system. The Government has stated four principles for the reform enabling personal responsibility, ensuring that all groups are treated fairly, making the state pension system more simple, and ensuring the affordability and sustainability of any reform option, meaning that any reform option must cost no more than maintaining the current system. The Green Paper consults on two possible reforms:

• an acceleration of the existing reforms so that the state pension evolves into a two-tier flat rate structure more quickly. 
• a more radical reform towards a single-tier flat-rate pension set above the current level of the Guarantee Credit element of Pension Credit (for example £140 per week).

This Briefing Note examines the structure of the current state pension system, the implications of the Government’s proposed reforms and sets out the trade-offs involved. It finds that both reform options would imply a significant reform of the current state pension system and they would both create winners and losers.