Basic state pension at 100

Thursday, 11 September 2008

In July this year the basic state pension had its one hundredth anniversary. It was introduced to acknowledge the debt that ageing workers had paid to society.

An even worse fact is that only 35% of women and 85% of men actually receive the full pension, thanks to the complexities of National Insurance contributions.

There have been some proposals to make the pension fairer, but whether it is affordable to the taxpayer is another matter. The “problem” is that society as a whole is now living considerably longer than when the pension was introduced. The basic state pension currently costs £69bn, with expectations to reach £240bn by 2050.

The National Pensioners Convention would like to see the basic pension linked with wage inflation (that would cost £2.8bn) along with an increase in the basic pension to £151 a week – the official poverty line. The costs to the Treasury would be high - and it is likely the taxpayer, who would have to bear these costs.

To offset that, there is talk of raising the official retirement age – initially to 65yrs for women by 2020 – and then 68yrs for everyone. This idea may prove unpopular with everybody- but especially those in manual jobs.

Additional pension funding is available for those aged over 80yrs of age. It’s a 'non-contributory' or 'Over 80 Pension' but claimants have to meet residency conditions. This amounts to £54.35 a week for 2008-2009.

Pensioners with low incomes can add to their weekly income with a guaranteed minimum of £124.05 for a single person and £189.35 for a couple. Charity Age Concern says that about one-third of people entitled to this pension credit are not claiming it – that is around 1.7m people. Pensioners failing to claim this are missing out on £1,352 a year on average.

At 80, pensioners receive an extra top-up to their weekly pension. It is a staggering amount of only 25p! It was introduced in 1971, and based on the price of a bag of coal, but the amount (five shillings) has not been updated in over 37 years.

As it nears its centenary, the basic state pension looks to be in dire need of a severe make-over!

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