By Max Clarke
Government state pension reform plans are good news for pensioners; but the 10 million who are retired or will have retired when the new plans, announced yesterday by Pensions Minister Steve Webb, come into effect by 2015 or 2016 still need to maximise retirement income, warns leading independent equity release adviser Key Retirement Solutions.
Around 600,000 people retire each year and will have to rely on the current mix of State pension and benefits before the new flat rate scheme comes into effect. The Government new flat rate state pension scheme has been welcomed for its clarity, though pensioners are still no better off than before.
The current full state pension is £97.65 a week, but can be topped up to £132.60 with pension credit. Due to the complexity of the old system, more than one and a half million eligible pensioners do not claim pension credit each year and around £5 billion in benefits goes unclaimed.
Under the new scheme, this could be replaced by a new £140 flat rate, with inflation expected to push this up to £155 by 2015 or 2016.
Dean Mirfin, Group Director at Key Retirement Solutions, said: “This announcement is great news for future pensioners who will no longer face the complexity of the old system in their effort to gain what they are entitled to.
“Although under this reform, not only will 10 million people who have already retired be excluded from the new deal, but actuaries say many other people still at work will not live long enough to enjoy its benefits.
“Whilst this will simplify the future claims process, pensioners will still struggle to enjoy a good quality of life due to a lack of available income. We are currently seeing a steady increase in pensioners looking towards equity release to supply that much needed income, and we anticipate that this will only increase.”