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&#39Flat-rate second pension to close gap&#39

The ABI is calling for urgent reform to the state pension by introducing a flat-rate second pension that it claims would lift state provision above the minimum income guarantee.

It warns that without fundamental change, the gap between basic state pension and the pension credit will increase, leaving up to 82 per cent of pensioners on means-tested benefits.

As part of its response to the Pensions Green Paper, the ABI says the target of spending 5 per cent of GDP on pensions could only be met if individuals&#39 savings levels are raised now.

The Department for Work and Pensions&#39 proposals for the overhaul of UK pensions have been criticised for their failure to deal with the interface between state and private provision.

ABI director general Mary Francis says: “It is vital that future pensioners feel confident about what they will get from the state and that taxpayers are assured that state provision will be affordable.

“Having the right state pension framework is crucial for the success of all the other proposals and ambitions in the Pensions Green Paper. The Government needs to address this now.”

Marshall Williams & Co principal Ian Williams says: “Public sentiment is antipension due to lack of direction from the Government and a lack of faith in the ongoing tax incentives.

“The ABI&#39s view is correct because means testing and stealth taxes have removed the incentives to save.”

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