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David Cameron calls for state pension reform rethink

David Cameron 480

Prime minister David Cameron has insisted the Government reconsider its state pension reforms due to concerns the proposals may not find favour with core Conservative voters, according to the Financial Times.

In April 2011, the Department for Work and Pensions published a green paper outlining plans to introduce a flat-rate state pension worth £140 per week for future retirees. The paper also proposed introducing a mechanism to link the state pension age to longevity.

In March’s Budget, Chancellor George Osborne said further details on the proposal would be published in the spring.

A white paper on the reforms, which was postponed in July until the autumn, is now expected to set out the Government’s preferred way forward alongside some alternative options, rather than be directive, according to the FT.

There has been some concern that the reforms may prove unpopular with those who have already retired and so will not benefit from the reforms or those who may lose out through the abolition of the state second pension.

The reforms are also likely to set up a new collision between the Government and public sector trade unions as the abolition of contracting out for defined-benefit schemes would mean public sector workers paying an extra 1.4 per cent into their scheme, as they will no longer receive the rebate for being contracted out.

In an interview with Money Marketing in July, pensions minister Steve Webb confirmed contracting-out would not be included in the 25-year public sector reform agreement not to change public sector benefits beyond the current reforms.

A DWP spokesman denies there have been any calls for a rethink of the reforms.

He says: “We will bring forward the white paper as planned, which will set out our proposals. We have not watered down the plans to introduce a flat rate state pension and I do not see that changing. There is no set date for the paper but we will publish it by the end of the year.”

The Government’s April 2011 green paper set out two options for reform. Option 1 was an acceleration of existing reforms so that the second state pension moved to a flat-rate by 2020. Under this option contracting out would continue for members of defined benefit schemes.

Option 2, the “more radical” reform option, proposed moving to a single-tier, flat-rate state pension of around £140 a week at today’s prices. This was to replace the current system, which combines the basic state pension with payments from Serps and the state second pension, and bring an end to means-testing for pensions.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Dont worry Dave with the pensions gap wider than the Grand Canyon and set to get worse post RDR all the reform in the world will not make it any better.
    Sometimes you just need to go back to basic’s

  2. The tinkers tinker and that with which they tinker crumbles.
    We have had too many ignorant fingers in the State Pension pie for far too long. The changes made have merely been tokenism to the future with a firm eye on the next election.
    What we really need is an end to the PAYG system. A really decent State Pension funded by a huge Sovereign Wealth Fund, which in turn would be a major fillip to the economy. Instead of which what are these dopes in Westminster proposing? IINCREASING foreign aid to the tune of £300 per head of population.
    Auto Enrolment just won’t hack it and anyway it is the Government’s responsibility to provide public benefits – not private enterprise.

  3. Maybe the will have a rethink on adviser remuneration before January 2013. (and then I woke up)

  4. 2 Years ago and again i think 5 years ago.Every single mp thats approx 600 gave themselves a £20,000 top up on their own pensions

    thats 600 x £20,000 = £120,000 x 2 = £240,000

    This did not even make the news.It seems only some of us are in a recession the payers not the wasters

  5. So the government thinks that the changes might upset some people. Surely, if someone has paid tax for 49 years and gets a State pension of £105pw whilst someone who has paid tax for 30 years and retires a week after new rules are implemented (to pay a flat rate) and receives £140pw for the rest of their days, there is reasonable grounds for some people to feel hard done by. Similarly, if higher earners who have built up a significant SERPS entitlement now see it removed (perhaps their planned State pension was going to be £200pw and it suddenly drops to £140pw), this too is close to being a criminal act.

    Let’s state the fact simply – the UK State pension scheme is the most unfair pension scheme in the universe and any tinkering along the lines now being contemplated will make it even more unfair. Anyone who trusts a politician to honour a promise is living in ‘cloud cuckoo land’.

  6. Here we go again ! Time to tinker with pensions. No wonder people don’t save for retirement.

  7. Some good points there Bill – people just want fairness and therefore any changes need to reflect this.

    I also feel (perhaps stating the obvious) that the state pension & benefits system needs to ensure there is no disincentive to save.

    Finally, someone needs to be brave and look at the big picture and separate the cost and nature of state pension provision from their political influences.

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