Green Paper issued April 2011. The consultation period ends on 24 June 2011  

The DWP has issued a Green Paper on the reform of State Pensions. Two options are considered: Option 1: faster flat-rating

  • The upper band for accrual of State Second Pension (S2P) will be reduced from £40,000 to £14,000 by 2020.
  • From 2020, S2P will be earned at £1.60 per week for each qualifying year.
  • 30 qualifying years will be needed for a full Basic State Pension.
  • S2P may be accrued for up to a maximum of 49/50 qualifying years.
  • DB contracting-out will continue.  

Option 2: single-tier flat-rate pension

  • Basic State Pension and S2P will be combined (estimated at £140 per week) in a flat-rate pension.
  • 30 qualifying years will be needed for a full single-tier pension.
  • There will be individual qualification for the single-tier pension: regardless of marital status with no special rules for bereavement, marriage or divorce.
  • Individuals must have a minimum of seven qualifying years for eligibility for the single-tier pension.
  • The single-tier pension will be updated in line with "triple guarantee") (the higher of earnings, prices or 2.5%).
  • DB contracting-out will cease.
  • The single-tier pension will be reduced for some individuals to reflect periods of contracted-out service.
  • Increased payments for individuals with higher amounts of S2P accrued before the transaction to a single-tier pension.  

The Government is also asking for views on mechanisms to increase State Pension Age more automatically in future to reflect increases in life expectancy.