7.1.2 The new flat-rate state pension
From April 2016 for those new to attaining the state pension age (SPA) the state basic and additional pensions has been replaced by a single flat-rate pension (originally announced as £155.65 a week).
In 2016/17, the UK government’s assessment of the minimum weekly income required by pensioners was £155.60 for a single person and £237.55 for a couple (whether married or not). Consequently, for a single pensioner, the basic state pension in 2016/17 was only three-quarters of the minimum means-tested income that a pensioner was deemed to need.
This contrasts with the situation in the mid-1980s, when the basic state pension was about the same as the minimum level of income that was deemed enough for a single householder to live on. Therefore, anyone relying solely on the basic state pension is now also eligible to claim a means-tested top up.
Such means-tested retirement benefits can discourage saving for retirement because building up a small private pension simply reduces the amount of benefits that can be claimed. The change to a flat-rate pension from April 2016 is intended to ensure that the state pension no longer falls short of the minimum income required. As a result, far fewer pensioners will need to claim means-tested benefits and there will be no disincentive to saving for retirement.