All new pensioners could be entitled to a flat rate payment of at least £155 a week under the coalition’s plan to reform the basic state pension within four years.
Iain Duncan Smith, the Work and Pensions Secretary will publish details next week of his plans to integrate pension payments into one single scheme.
The current state pension for men and women is £97.65 a week for men and women but is topped up by means tested elements such as the state pension credit to a minimum of £136 a week.
Ministers had previously indicated that the new payment could be £140 a week if it was introduced this year, just £4 above current levels. The funding for the small pension hike would come in adminstrative savings from abolishing current pension top ups such as the pension credit and contracted out second state pensions.
But the coalition has already pledged to uprate the state pensions with earnings or 2.5 per cent a year, whichever was higher. Under this formula the pension would be worth about £155 a week when it is expected to be introduced in 2015/16.
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Last night officials tried to dampen speculation about the rates. “Speculation of what the benefit rates would be in years to come is just that,” said a spokesman for the Department for Work and Pensions.
“We have been clear that reforms for future pensioners would bring in a simple, contributory flat-rate support above the level of the means-tested Guarantee Credit. We will be bringing forward a Green Paper to consult on options shortly.”
In last week’s Budget the Chancellor confirmed that the flat rate pension would only be paid to new pensioners and would not affect those who have already retired.
Under the reforms the second state pension would be abolished although existing contributions would be honoured.
More than 1.5 million pensioners who are eligibile for the means tested pension credit do not claim it and ministers believe that the new scheme would benefit these poorer groups. But officials admitted that a small group of people who now receive only £97.65 a week and are not eligible for a means tested top up may benefit from the larger rise and there is likely to be disputes over whether wealthier pensioners are the biggest gainers.