Petition Set a Minimum Pension Guarantee (MPG) of at least £200 pw for state pensioners

Government responded

This response was given on 22 August 2022

The Government has no plans to introduce a new £200 Minimum Pension Guarantee. The Government is committed to a decent State Pension as the foundation of support for people in retirement.

The Government spends over £134 billion each year on benefits for pensioners, including over £110 billion on the State Pension. This is likely to increase substantially in 2023/24. This proposal would add significant costs and make the system unsustainable and create additional burdens on the working age population.

Since 2010, the full yearly amount of the basic State Pension has risen by over £2,300, in cash terms. That's £720 more than if it had been uprated by prices, and £570 more than if it had been uprated by earnings. The Government remains committed to implementing the Triple Lock in the usual way for the remainder of the Parliament.

This petition raises a comparison between the pre-2016 system, and the new State Pension which was introduced for those reaching State Pension age after 2016. The new State Pension was introduced to provide a simpler, clearer, and sustainable foundation for private saving. The new system was designed to cost no more than the previous system and care has been taken to ensure fairness to both groups. It is not possible to make direct, like for like comparisons between State Pension amounts between the two systems. It is not accurate to say that people who reached State Pension age before 6 April 2016 only received the basic State Pension. People who were not contracted out would also have built up some additional State Pension, or SERPS. Those who were contracted out would have received the benefits of membership of an occupational or personal pension scheme, as well as paying less into the national Insurance system at that time.

Although the systems are different, they both reflect the National Insurance contributions an individual has made. Most people in the early years of the new system will get a similar State Pension to that they would have received under the previous system.

The State Pension operates under a contributory principle. This means that all individuals build up their National Insurance record during their working lives, in the expectation that they are contributing toward the payments of benefits for themselves and others on a pooled basis, including the State Pension. Upon reaching State Pension age, the State Pension is paid to everyone who is eligible and has contributed in this way, with the amount awarded based upon their National Insurance record.

The Government also provides additional support to older people, which includes the provision of free bus passes, free prescriptions, Winter Fuel Payments and Cold Weather Payments.

Pension Credit is a means tested benefit and provides a top up for people of State Pension age to a weekly minimum amount, (currently £182.60 for single people and £278.70 for couples). These amounts may be higher for those with caring responsibilities, a severe disability or certain housing costs. This approach ensures that spending is targeted at those most in need. Information about Pension Credit is available from the Government website – www.gov.uk by entering ‘Pension Credit’ into the search bar.

In response to the current cost of living concerns, the Government understands the pressures people are facing and is providing over £37 billion of support this year. This includes the £650 Cost of Living Payment, payable in two lump sums, which targets support at low-income households on means-tested benefits, including Pension Credit. In addition, pensioner households will receive a separate one-off payment of £300 (through and as an addition to the Winter Fuel Payment). All households with a domestic electricity bill will also benefit from the £400 support being provided through the Energy Bills Support Scheme.

On international comparisons, it is difficult to make meaningful comparisons between State Pension schemes in different countries because there are many fundamental differences in the way they are run. There are many factors to take into account such as different tax systems, cost of living, access to occupational pensions and availability of other social security benefits, Health and Social Care systems, as well as the provision of services and goods free to pensioners or at concessionary rates.

However, OECD rankings show that, due to Government reforms including the new State Pension and Automatic Enrolment, the UK’s pensions system will provide future workers with income replacement rates which are comparable to the OECD average and higher than countries such as Switzerland, Norway, and Germany.

Department for Work and Pensions