Smith outlines state pension plan
Iain Duncan Smith is to outline plans to create a flat-rate £140-a-week state pension after condemning the existing system as complex and in "crisis".
The Work and Pensions Secretary will give MPs details of radical changes designed to encourage more people to save for their retirement.
Pensioners currently receive at least £97.65 a week but this will rise to at least £140 at current prices. Under the proposed reforms, means-tested credits, which see nearly half of all OAPs claim £132.60 a week, will be scrapped in about five years' time as the Government looks to simplify pensions in a similar way to the benefits system.
Interviewed on Sky News' Murnaghan programme, Mr Duncan Smith said pension credits currently acted as a "disincentive" to save while the Government has moved to require employers to enrol staff automatically in private schemes from next year to boost individual savings for retirement.
He said that in order to meet European regulations, men and women would retire at the same time. The age would rise to 66 for both sexes by 2020 - a move which could bring £14 billion into the Treasury's coffers.
"What we have said is that two things exist," Mr Duncan Smith said. "The first is that it's so complicated that nobody understands it and (they) need to get this right for an income in retirement. The second thing is that far too few people are saving as a result. Seven million people don't save at all towards their pensions right now.
"The third element, and really where it's quite critical, is that it acts as a disincentive to save because right now nearly half of all pensioners are on a pension credit top-up which means basically it's a crisis so we need to change that."
He added: "The key problem for us is that young people growing up now are going to take the burden of debt that we owe right now. They will have to pay for their grandparents and parents in retirement, and they will have to save. We therefore have to help them to be able to save properly."
Pensions Minister Steve Webb said the system needed to be reformed to meet the demands of an ageing population and warned that people would have to work for longer and save more.
He told BBC Radio 4: "Tomorrow's pensioners do face a very different world. They will, on average, be working for a lot longer, they will be retired for longer, they won't on the whole have final salary guaranteed pensions in the way that perhaps their parents did. We therefore need a simpler, clearer foundation because more of them will now be asked to save for their retirement."