COMMENT
Why We Want A Citizen's Pension

There's no doubt that the current state pension system is over-complicated and poorly understood by many people. Indeed, the Pensions Commission, which is due to make recommendations on pension policy in the autumn, describes the UK pension system, both state and private, as 'bewildering'.

So it's not surprising that numerous organisations with an interest have come up with suggestions about how to improve it. To my mind, simplicity is key and the Government should start with the state pension system.

At the moment, you're only entitled to the basic state pension if you've made full National Insurance Contributions (NICs) throughout your working life. The Government expects a man to work for 44 years to qualify for the full pension while a woman will need to work for 39 (rising to 44 as the retirement age moves from 60 to 65 for women by 2020). If you haven't worked for the full quota, your pension is reduced proportionately. And if you've worked for less than 11 years, you get zilch!

Obviously, you don't starve if you don't qualify for the full pension because the complex system of pension credits sees to that - if you can work out how to fill in the forms! But wouldn't it be easier introduce a simpler way?

The idea that I think makes the most sense comes from the National Association of Pension Funds (NAPF) who want the Government to introduce a 'Citizen's Pension'. What they're is suggesting is that the Government gets rid of all the bits and pieces attached to the basic state pension such as the additional state pension and pension credits and have a simple 'Citizen's Pension' that provides a flat rate for all pensioners.

Entitlement would simply be based on UK residency rather than National Insurance Contributions and earnings. It would do away with means testing - a scheme that is expensive to administer and which can be humiliating for the claimant. It would also rise in line with earnings rather than prices. What's more they've done their sums and say the Citizen's Pension wouldn't put any more pressure on the public purse than there is now. If set at the current pension credit level, every pensioner would automatically get £109 a week - something that would be particularly advantageous to women as it would pay the same pension to all regardless of their working history.

The NAPF's proposals seem sensible enough and they've just published a survey which indicates that it would go down well with the public too. With everyone knowing exactly how much they would get from the state, their survey reveals that more people would be encouraged to save or to work past retirement age if they wanted to supplement it. Which is, of course, exactly what the Government wants us to do.

Find out more about the State Pension, and how to get a State Pension forecast in our Pension Centre.