Government brings state pension reform forward to 2016

LONDON Tue Mar 19, 2013 5:14pm GMT

A pensioner talks to a friend (unseen) while sitting on a mobility scooter in Corporation Street in Corby, central England November 15, 2012. REUTERS/Eddie Keogh

A pensioner talks to a friend (unseen) while sitting on a mobility scooter in Corporation Street in Corby, central England November 15, 2012.

Credit: Reuters/Eddie Keogh

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LONDON (Reuters) - Up to 400,000 more Britons will qualify for a new higher flat-rate state pension, the government said on Tuesday after it announced it would introduce the reform a year earlier than expected.

The Conservative-led coalition said the simplified scheme providing a flat-rate payment of 144 pounds a week, would benefit low earners, the self-employed and women who have taken time out from work for childcare.

The change - one of the biggest overhauls of Britain's pension system in decades - was expected to come into force in April 2017 but has been moved forward to April 2016, the government said.

The current system includes a basic pension, a second state pension and the ability to top up pension contributions with pension credits. This will all be merged into the universal flat-rate payment.

Critics of the new scheme say Britons would have to work five years longer to qualify for a full pension - 35 rather than the current 30 - and end up with less than they get today.

The government has sought ways to stem the soaring cost of its universal basic pension provision - which is projected to hit 8.1 percent of economic output by 2060 .

It has already said the pensionable age will rise to 67 for both sexes by 2028, from 65 for men and 60 for woman.

In a bid to try to force more Britons to start saving for retirement, the government has also introduced an "auto-enrolment" scheme, under which employees will be automatically enrolled into their company pension scheme or a state scheme, while having the choice of opting out.

(Reporting by Sarah Mortimer; Editing by John Stonestreet)

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