Universal pension gets a step closer

A SIMPLIFIED State pension which will see everyone receive the same basic amount regardless of their National Insurance contributions will be considered by Ministers this week.

The proposal, which is expected to feature in Labour's General Election manifesto, is designed to improve the incomes of women pensioners.

Under the present system, many miss out on the full basic pension because they have to take time out from work to bring up children and do not build up enough contributions.

Work and Pensions Secretary Alan Johnson will discuss his 'Citizens' Pension' plans with other members of the Cabinet on Thursday.

If introduced, it would be the biggest single shake-up of the State pension scheme since it was introduced more than 50 years ago.

Critics say the plan to cut the link between how much is paid in and how much is paid out will penalise those who have worked all their life.

To qualify for the Citizens' Pension, people would have to prove they had been resident in Britain for a number of years. They would receive a basic guaranteed income, with any additional amounts from their earnings-related pension - or private pension - on top.

While the basic amount has not been decided, it is expected to start at around £105 a week, with its future value linked to average earnings.

The present basic pension is £79.60 for a single person and £127.25 for a couple. Johnson argues the current system is biased against carers or those out of continuous full-time employment - both of which groups feature women heavily.

Only 13% of women get a full basic State pension and only half get any basic state pension, compared with 90% of men.

This is blamed largely on the rule which requires workers to pay National Insurance contributions for at least ten years before qualifying for a basic State pension.

If Johnson's plan goes ahead, it would mean the means-tested 'pension credit' created by Gordon Brown five years ago to top up the basic pension would be axed.

There have been growing criticisms that Brown's system - which boosts the basic pension to £105.45 for single pensioners and £160.95 for couples - is a bewildering mess which has been taken up by few people.

Johnson's proposal comes as he unveils his department's five-year plan. He says he is opposed to 'patching up' the existing State pension system, wanting Cabinet colleagues to accept his more ambitious plans.

The strongly Blairite Minister is also expected to call for reforms of incapacity benefits next week. A source close to Johnson said: 'This is a good idea and, although he is aware there are alternatives, he will be discussing it with colleagues.'