£144 is not enough to realise the benefits of a simple state pension

The Pensions Bill will have its second reading in the House of Commons today. I’ve already written about various aspects of the Bill on this blog, but the most important is of course the creation of a ‘single tier’ state pension in 2016. The government is embarking on a radical reform of the state pension system that will merge the basic and second state pensions (BSP and S2P).

Of course, most people who have not yet retired do not understand state pensions, so will hardly notice the difference. In my view, what will matter to them when they reach state pension age, as for pensioners today, is the weekly amount they will receive. On this, the proposed starting rate for single tier, £144 per week in 2012/13 terms, falls significantly short of providing for a decent and sustainable state pension.

A state pension of £144 is inadequate in terms of four specific criteria – all of which have been claimed, by the government, as reasons we need a single tier state pension in the first place.

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Image: Route79