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.