Q&A: State pension reform - FT.com How does the state pension currently work? A complex combination of basic state pension, state second pension (S2P) and pension credit. Many find the system confusing and are unsure of how much they will receive. To qualify for the full basic state pension, currently £107 a week, a person must have accrued 30 full years of national insurance contributions and be of state pension age, which is rising for both men and women. Those with fewer than 30 full years receive less than the full amount. However, higher earners are able to top up their basic entitlement because they pay more in national insurance contributions, for the state second pension. This can boost retirement income by up to £167 per week. Those on low incomes who do not build up this extra layer can be means-tested for pension credit, which guarantees to boost their basic entitlement to a minimum of about £142 a week. How was the government proposing to change this? Its preferred option for reform was to sweep away these three pillars and replace them with a simple system based on a basic flat-rate payment of about £140 a week in today's money. To get the full amount, 30 years national insurance contributions would be required. The flat-rate was pencilled in to start in 2015 at the earliest. Who had most to benefit from the flat-rate pension? Low-income earners and women who had taken career breaks, or not worked because they were looking after children or other family members. Because S2P is earnings-related, the lower paid are more likely to gain from a general uplift. Who would be the losers? Typically, people who were higher paid and in work for more years, and existing pensioners. Those already drawing the state pension would miss out because the flat-rate, which would be more generous for some, would not be retrospective, applying only to those reaching state pension age when the reform came into effect in 2015. Millions of higher earners, many of whom are also public servants, would also see effective pay cuts of up to 1.4 per cent because they would lose the national insurance rebate they received at the moment if they were "contracted out" of the S2P through a final salary scheme. What new options might the government consider in its white paper? Many believe it wants to avoid political fallout by pushing back the start date and implementing the flat rate more gradually. This would reduce the political heat but create an extra layer of complexity with a twin pension system. Is there a chance the flat-rate pension proposal could be scrapped? The feeling is that this is unlikely because it is too closely tied to the government's other fundamental drive to get more people to save via the workplace. Some suggest that Steve Webb, pensions minister, would step down if it were scrapped. What is my best course of action as a saver? There is probably little you can do now: whatever the solution it will take a few years to introduce the changes.