The Conservatives are claiming the Chancellor’s move to bring forward the flat rating of the S2P to 2009 could amount to a new £2bn raid on pensions.
Conservative Shadow Work and Pensions Secretary Chris Grayling says the original deadline for the reform could have been as late as 2014 or 2015, the potential end of the next Parliament, although it was aiming at 2012.
He says the change was supposed to be brought in with the re-linking of earnings but the Government has not announced any plans to bring forward this date from the current plans of 2012, or the end of next Parliament.
Grayling says this could result in a window where many people pay more money for a smaller pension with middle to high earners suffering from the flat-rating without the benefit of the state pension being re-linked to earnings.
Grayling says: “After the damage that Gordon Brown has done to our pensions system in the past ten years, it beggars belief that his Government would bury another multi-billion pound tax raid on pensions in the small print of its pre-Budget report.
“This is nothing less than a new stealth tax on retirement, and will mean a pay-cut for large numbers of pensioners at a time when they are already under financial pressure from big increases in their cost of living. The Government obviously thinks it can bury the bad news and get away without people noticing. It won’t succeed.”
Aegon head of pension development Rachel Vahey says: “Bringing forward the flat-rating of S2P will certainly save the Government money but the amount saved depends on a number of factors and it is too early to calculate this accurately.
“Whether it is a direct cause and effect potentially oversimplifies a situation that is far more complex.”