Chancellor brings forward pension reform

The Government's overhaul of the pension system and social care funding will be brought forward by a year, George Osborne, the Chancellor, has announced.

The plans, which include a flat-tier pension worth around £144 a week, will now start in 2016, Mr Osborne said ahead of Wednesday's Budget.

A cap on the amount older people pay for social care in England - which was to be £75,000, but will now be £72,000 - will also be brought in in the same year.

Mr Osborne said the changes would 'help people who are young and people who are old', but Shadow Chancellor Ed Balls argued the government was not doing enough to stimulate growth, accusing the coalition of following the 'economics of the lunatic farm'.

At the moment the full state pension is £107.45 a week, but this can be topped up to £142.70 with the means-tested pension credit, and a state second pension which is based on National Insurance contributions.

Anyone who is eligible for the state pension before April 2016 will continue to receive their entitlement under the current system. But, for new pensioners, the second state pension will be abolished.

Anxiety over care costs

Speaking to BBC One's Andrew Marr Show, Mr Osborne said the flat-tier pension would be 'a huge boost for people who want to save for their retirement'.

The cap on social care costs will only cover the cost of social care and people would still have to pay for accommodation and food - although some support will be provided.

Michelle Mitchell, charity director general at Age UK said: 'The current level of the cap on social care costs will temper rather than dispel anxiety for most around care costs and it is important that the real term value of the cap is lowered over time. The rise in the level of the means test will also provide much needed additional help towards the costs of care and we would hope that this will come into effect at the same time.

'The single tier pension goes a long way to ensure a safer fairer system and help people better plan for retirement but it is important that the Government does not overlook the needs of the millions of current pensioners who are also struggling to make ends meet.'

Copyright Press Association 2013