State Pension: new plans could guarantee UK retirees five years of DWP payments even after death - news

• Former pensions minister Sir Steve Webb has proposed a five-year minimum State Pension guarantee, even if a retiree dies early
• Under the plan, any remaining payments would go to the person’s heirs, ensuring families aren’t left out of pocket
• The idea aims to make the system fairer for those who die soon after reaching pension age, while keeping costs under control
• Sir Steve also suggested raising the State Pension age by one year every decade to reflect longer life expectancies
• The proposal comes as Chancellor Rachel Reeves faces pressure to balance public finances ahead of the Budget

British retirees could soon be guaranteed a minimum of five years’ worth of State Pension payments under new proposals designed to make the system fairer for those who die earlier in retirement.

The idea, put forward by former pensions minister Sir Steve Webb, comes as Chancellor Rachel Reeves faces mounting pressure to balance the books ahead of the upcoming Budget.

State Pension spending has grown from about 2% of the UK’s economy 80 years ago to around 5% today.

The Office for Budget Responsibility (OBR) expects it to keep rising, reaching about 7.7% by the early 2070s, mainly because people are living longer and the triple lock makes pensions more expensive.

What’s being proposed?

The proposal, detailed in a new report by consultancy firm LCP, where Sir Steve now works, would see anyone reaching State Pension age guaranteed at least five years of payments, even if they die before then.

In such cases, the remaining balance would be passed on to their heirs, ensuring families are not left short-changed after a lifetime of National Insurance contributions.

Sir Steve, who introduced the triple lock during his time in government, said the reform would help address long-standing concerns that people who die soon after retirement effectively lose out.

He told i: “Those who have paid into the system all of their lives would be guaranteed that they or their heirs would get a minimum payout once they start drawing a pension.”

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Will the State Pension age increase?

Sir Steve also argued that the State Pension age should continue to rise in line with increasing life expectancy, by roughly one year every decade, so that, on average, people still enjoy about 20 years of payments.

Currently, the State Pension age stands at 66, having gradually increased from 60 for women and 65 for men over the past decade.

But with life expectancy at 83 for women and 79 for men, not everyone lives long enough to receive decades of payments, raising questions about fairness.

“Our proposal for a guaranteed minimum payout period of five years represents a ‘something for something’ reform,” Sir Steve said.

He also suggested that workers who die before reaching pension age but have paid into the system should receive an equivalent payment through bereavement benefits.

The timing of these ideas is notable; reports suggest the Chancellor is considering changes to pension tax relief, including capping the amount of salary that can be sacrificed for pension contributions without incurring National Insurance, in a bid to raise revenue.

With the cost of supporting an ageing population climbing rapidly, Sir Steve’s proposal could appeal to both policymakers and the public by offering fairness without increasing long-term spending.