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Government sets out plans for flat-rate state pension

The Government is setting out its plans for a new flat-rate state pension system, which is expected to take effect from April 2017.

Under the existing system, many poorer pensioners are entitled to top up their basic state pension payments of £107.45 a week, via the means-tested Pension Credit and the second state pension.

However, figures suggest that around 1.5 million people are failing to claim Pension Credit.

The new single-tier pension of around £144 a week (plus inflationary increases) is expected to be paid to all qualifying pensioners who reach the state pension age from 6 April 2017.

While the changes would be likely to benefit the self-employed and many women, the system would not distinguish between poorer and wealthier individuals.

The Government will also need to determine how to deal with people who have contracted out of the state second pension.

The state pension age is set to rise to 66 by 2020, and to 67 by 2028.