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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From April 2016 for those new to attaining the state pension age (SPA) the state basic and additional pensions have been replaced by a single flat-rate pension (for 2018/19 of £164.35 a week).

For 2018/19, the UK government’s assessment of the minimum weekly income required by pensioners is £163.00 for a single person and £248.80 for a couple (whether married or not).

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.

Figure 2