15.01.13
Single pension could bring ‘step change’ to retirement – CIPD
The white paper published by pensions minister Steve Webb yesterday sets out how a single flat-rate pension is to replace the current system of two state pensions.
Despite some claim and counter-claim about winners and losers in the short and long term, many commentators have welcomed the simplicity of the new system compared to the old as a valuable benefit in itself.
Generally, the move will leave pensioners better off, with the majority able to claim higher state income for at least two decades after the changes are introduced. Fewer than 10% of the top earners will lose out under the new system, the Government has stated.
However the projected rate is still below the poverty line of £165 a week for a lone adult, and there are concerns that nearly seven million workers who currently pay lower national insurance contributions in return for not claiming more than the basic state pension would no longer be able to opt out of the full pensions and would have to increase their contributions by 1.4%.
Yet overall pensions experts have welcomed the move, suggesting that the simplification of a single pension could encourage more people to save for retirement.
Charles Cotton, rewards adviser at the CIPD, commented: “This is a long-term decision, which has the real potential to bring about a step-change for the better in the retirement income of Britain’s employees. By creating a simple, easy to understand baseline pension, it will become a lot easier for employers and others to explain and encourage more workers to invest more in pensions savings to boost retirement incomes closer to the levels most would aspire to.
“This should also help contribute to driving up the quality of workplace pensions. Without the simplicity of a flat-rate pension to explain what life on the state pension alone looks like, it has been difficult for the providers of good workplace pensions to use them as a competitive advantage to attract and retain the most talented employees. This change offers the prospect of changing that situation.”
The Institute for Fiscal Studies says: “The proposed system looks straightforward and – in terms of its clarity – appears to be a clear improvement on the complex miscellany of rules which govern the current system.”
Jonathan Jones of the Spectator praised Webb as an “effective minister”, noting: “After two years and eight months in the job, Steve Webb is by far the longest-serving Pensions Minister since the post was created in 1998. And, as last week’s mid-term review showed, pensions is one area where the coalition has much to boast about: the ‘triple lock’, the Hutton review, raising the pension age, ending default retirement and compulsory annuitisation, and introducing automatic enrolment.”
Other parts of the media however, including the Sun and the Mirror, attacked the changes, and as we reported yesterday, the National Pensioners Convention called them “a con trick”.
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