David Cameron has put the brakes on the plan for a flat rate state pension of £140 amid fears that the government could alienate the electorally crucial "grey" vote.
Those who could lose out include higher earners, who will no longer be able to boost their retirement income through the state second pension, which will be abolished.
Earlier this month Investors Chronicle argued that a flat rate state pension was long overdue. Current state pension benefits are calculated via a system of means testing for people on lower incomes, plus additional payments via the state pension for higher earners. Currently the amount of state pension money paid out to pensioners can differ by more than £200 a week - that's a difference of £10,000 a year. This is because the level of basic and additional state pension payouts can vary so much. The latest DWP administrative data shows state pension income varies from around £7 a week to £230 a week.
This complexity means it is nigh on impossible to work out what you will get, meaning factoring any level of state pension into your financial planning is dangerous.
In his March Budget, chancellor George Osborne promised "a single, generous basic state pension". From 1 October millions of people will be automatically enrolled into a workplace pension. If the government fails to publish its plans for the flat-rate state pension by then, lower-income workers could end up simply replacing means-tested state benefits with the savings they make.
The Department for Work and Pensions insists that it will deliver a white paper on state pension reform, but it is now expected to be consultative rather than prescriptive.
