Pension reform means we must claim all benefits for a minimum income retirement

The new simplified state pension provides a safety net so that most pensioners should achieve an acceptable standard of living – as long as they claim all the benefits they’re entitled to.

Inevitably, much of the comment and discussion of these reforms has turned to winners and losers. But stepping back from this level of detail, Pensions Minister Steve Webb has been on the airways saying this reform will provide a “bare minimum” income for people to live on, for them to top-up with a private pension where they can – something the means-tested pension credit has arguably disincentivised.

So the question is whether the “bare minimum” the government is proposing is adequate to achieve an acceptable standard of living.

Here at JRF, we have a handy means of assessing that proposition. We’ve been working with Loughborough University for a number of years to calculate a Minimum Income Standard – research that involves members of the public in assessing what is needed to reach a socially acceptable standard of living in the UK in the 21st century.

Using this research we’ve created a Minimum Income Calculator, which allows people to compare how their income measures up to the Minimum Income Standard for their household type. On inputting the numbers, it would seem that so long as pensioners claim all the other benefits they are entitled to, such as housing benefit, council tax benefit and the winter fuel payment, £144 per week will generally be enough for most pensioners to achieve an acceptable standard of living according to the MIS. This is good news indeed.

It’s interesting to note that the current state pension system also provides most pensioners with enough income to achieve an acceptable standard of living, so long as they claim pension credit and all the other benefits they are entitled to. But here’s the rub: people often do not claim what they’re entitled to. Whether this is driven by lack of information, the complexity of the bureaucracy or the stigma of applying for means-tested benefits, pension credit is only taken up by about two thirds of those eligible for it. The result is people struggling to get by.

That is one reason why the simplification of the state pension is so important. Under these reforms a genuine safety net will exist for many, with the new state pension providing them with enough income to achieve a socially acceptable standard of living as they enter the later years of their lives.

After several delays, the Government’s plans for state pension reform have finally been published. The proposed changes include the abolition of the second state pension and the introduction of a flat rate state pension of £144 per week, as long as 35 years of contributions have been built up. Importantly, in most circumstances, it will be possible to accrue contributions while undertaking caring responsibilities, or while seeking work.

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