State pensioners issued major update over DWP starting to 'means testing'

State pensioners have been told the Department for Work and Pensions (DWP) State Pensions payments "can't be means tested". A former DWP employee says means-testing will never happen due to the complexity of the contributory benefit.

The insider told the Daily Record: “What is overlooked is the fact that people pay cash into the State Pension scheme in the form of Voluntary Contributions. So you are not going to pay cash into a scheme unless you are entitled to the payment of that benefit.

“If the State Pension was means-tested, HM Revenue and Customs (HMRC) would have to refund Voluntary Contributions to those members of the public, who had paid them, but were not entitled to the payment of State Pension.”

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David Blanchflower told i back in March that a future government needed to raise the level of the state pension and would probably need to consider an element of means-testing. But experts have warned there are “significant barriers” to the plan.

Steve Webb, former pensions minister and now a partner at LCP, said: “If there is concern about the future cost of the state pension, there is a range of ‘levers’ which can be pulled which stop short of the nuclear option of means-testing.

"These include changing state pension age, changing indexation, or changing the rules. The big problem with means-testing is that it doesn’t work well with a voluntary system of automatic enrolment; if people with decent private pensions lose some or all of their state pension it suddenly becomes less clear that you should stay enrolled rather than opting out.

"After all, why not save yourself some money when you are working and then get a full pension in any case?” John Greer, head of retirement policy at Quilter, said that changing the way growth in pensions was calculated could be a more “sustainable” way of changing the state pension, rather than means-testing.

Tom Selby, director of public policy at AJ Bell, added: “There is a reasonable debate to be had about the future of the state pension, in particular in relation to the wide variations in life expectancy people experience in different parts of the country. However, the cost and complexity of means-testing are significant barriers."