Reader’s Question – How will the proposed universal flat rate pension affect my state second pension?

3 min Read Published: 14 Jan 2011

Reader's Question

Hi there,

Can you tell me if I would lose my SERPS if the Government decides to have the same pension for everyone?

After all I paid into that and could have opted out and invested that money in a company pension or elsewhere.

Can you help?

Teri

My response

Teri,

A good question.

But the short answer is that we don’t yet know what will happen. Back in October there were reports that the government planned to do away with the basic state pension, state second pension and pension credit and replace it with a single universal flat rate pension.

News reports cited a figured of around £140 per week. But since then nothing much has happened and we still await a consultation paper from pensions minister Steve Webb. Interestingly, today Money Marketing reported that ‘’the Government has paved the way for introducing a universal state pension following the introduction of an amendment [to pension legislation] allowing policymakers to fast-track consolidation of the state second pension’’. The full article can be found here.

To sum up the article, the amendments to legislation in the Pensions Bill will allow the government to consolidate S2P (or SERPS) by order. The logic being that once they can forcibly consolidate the state second pension into the basic state pension it will be easier for them to just increase the basic state pension to give the new universal flat rate pension. So it seems that the foundations are being laid to make the flat rate pension a reality.

But remember the government is also quoted as saying ‘‘around 11 million people who built up contracted-out rights between 1978 and 1997 will be affected by the decision, although there will be no impact on a person’s overall state pension income over the course of retirement’’.

So to sum up, we don’t yet know how the state second pension will be affected by the move to a universal flat rate pension but there seems to some sort of reassurance that those affected by its removal won’t be worse off. But watch this space as I will obviously provide more details as and when they are released.

Image: Filomena Scalise / FreeDigitalPhotos.net

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