State pension plan under scrutiny

Many women are missing out on a full state pension

A revamp of the state pension system which could benefit many women deserves "closer examination", according to Work and Pensions Secretary Alan Johnson.

The change would see pensions being calculated on length of residency in the UK rather than National Insurance (NI) contributions.

Reform could aid many women, carers and those with broken employment records.

Mr Johnson told parliament he was "very positive" about the idea, dubbed the citizens' pension.

Missing out

There has been growing concern that many people are set to miss out on a full state pension because they have not paid sufficient NI contributions.

I think (the citizens' pension) is really interesting and deserves much closer examination Alan Johnson, Work and Pensions Secretary

To be entitled to the full state pension men need to have made 44 years of NI contributions, while women have to make 39 years.

Those who receive unemployment or incapacity benefit have their state pension credited as though they were working.

But people who are not employed, because, for example, they are looking after children or elderly relatives, will not be making NI contributions and so may fail to meet the criteria for a full state pension.

Fairer system

On Wednesday, during a parliamentary debate on the UK's pension crisis, Mr Johnson told MPs that he was looking at the citizens' pension idea.

"I have an absolutely open mind, veering towards being very positive about it... I think it is really interesting and deserves much closer examination."

In response, Liberal Democrat pension spokesman Steve Webb said he welcomed the government's decision to look at reform of the current state pension.

"A citizens' pension would right the injustices of the contributory system, which particularly affect women," Mr Webb said.

However, David Willetts, Conservative shadow work and pensions secretary, criticised Mr Johnson for failing to "understand the value of the contributory principle."

On Tuesday, the government-appointed Pensions Commission released its interim report into the UK pensions crisis.

The report estimated that more than 12 million working people in the UK were not saving enough for their retirement.

It suggested that some combination of higher taxes, more saving and a higher average retirement age would be needed to solve the problem.