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Pensions minister Steve Webb wants small pots state pension alternative

Pensions minister Steve Webb wants to reform trivial commutation rules to allow people with small pots to use their fund to buy extra state pension, Money Marketing understands.

Under Government plans outlined in the Autumn Statement, anyone who has reached state pension age or will do so by April 2016 will be able to pay between £900 and £25,000 to top up their pension.

It is thought the Government will offer to increase peoples’ weekly state pension by around £1 for every £900 paid in.

Webb’s idea would be an extension of this reform, allowing people with total pension savings worth less than £18,000 – the trivial commutation limit – to use their pot to buy extra state pension rather than annuitising or taking the money as cash.

A source says: “The minister has been floating an idea that would simplify the process of buying extra state pension for people with small pots.

“So rather than having to turn their pot into cash and then use that cash to buy extra state pension, people could take their pot to the Department for Work and Pensions and it would be automatically converted into extra state pension.”

The idea could form part of the Liberal Democrat manifesto ahead of next year’s general election. But it remains unclear whether the Treasury, which oversees trivial commutation policy, would support the policy.

A DWP spokesman says the Government has “no plans” to pursue the reform.

Hargreaves Lansdown head of pensions research Tom McPhail says: “Trivial commutation is ripe for reform. Allowing savers with private savings below the trivial commutation limit to convert their pot into state pension would be a positive step.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. What the minister doesn’t say is anyone who goes down this route and then retires to join family in, say, Canada or Australia or a random lottery of countries finds, too late, that the UK government refuses to up-rate annually ones hard earned state pension. It is frozen, never to increase with the cost of living. This blatant discrimination does not affect everyone as more than half of expats are treated just the same as if they lived in the UK. This is a disgraceful theft of pensioners money and a stain on the reputation of British justice and fair play. Shame on you Webb and your fellow politicians for doing nothing to end this injustice…in fact this discriminatory policy has been written into the new pensions bill by Webb who, when in opposition called this policy unfair and opposed it vehemently saying all state pensioners had paid into the NI scheme and all are entitled to their pension including cost of living increases. Does that make you a hypocrite, Mr Webb? I think it does.

  2. In the article it says “The idea could form part of the Liberal Democrat manifesto ahead of next year’s general election. But it remains unclear whether the Treasury, which oversees trivial commutation policy, would support the policy.”
    I just wonder if the treasury consider the theft of the frozen ex-pat pensioners indexing trivial ?
    Maybe these are the faceless ones that are keeping the discriminative policy of freezing alive.
    In which case the Pensions Minister should be doing his job and speaking up for what is right for all pensioners and let the treasury worry about the cost which is what they are there for.
    Webb should be getting very verbal with them instead of making excuses. Perhaps he gets a backhander ?

  3. Why is this man trying to take your money? Be very careful when giving your money to the Westminster Pensions department.
    Ask any pensioner who decided to live in any number of overseas countries that do not get the increases to their pensions that others who live in the UK, USA, or the EU. The pensioners paid their contributions whilst working in the UK, Now that they have decided to join loved ones in say, Canada, Australia, South Africa and other commonwealth countries they find their pensions frozen. If other pension actuary’s were to do the same thing, the law would be charging them with theft or fraud, but of course the British Government gets away with this. WHY? WHY? It is time for Britain to wake up to this treatment of their pensioners, some of whom fought to save Britain in the last war. DISGRACEFUL, DISCRIMINATORY, UNFAIR AND UNJUST.

  4. Hargreaves Lansdown head of pensions research Tom McPhail says: “Trivial commutation is ripe for reform.

    I would like to suggest that the freezing of the 560,000 pensions of people living in the countries where the uprating of pensions is NOT allowed,is also RIPE for Reform and long overdue after 60 years of blatant discrimination.

  5. Christine Brightwell 21st February 2014 at 9:47 am

    Its an interesting idea. Is Webb joining the Liberals then? Tom (and everyone above) I agree, we need to sort out the frozen ex pat pensions first. There is a large part of me screaming, lets take a year off the changes and concentrate on sorting out what he already have.

  6. Christine Brightwell, you are so right and the new Pensions Bill contains the very same discriminative policy as now exists for us placing future pensioners with the same theft. The mew bill was introduced because the old one was too complex and this man Webb said it was too complicated for Einstein to understand so he introduces the freezing by adding clause 20 to start to complicate the new one .
    we are now in the 21st century and he is so out of touch led by Iain Discriminate Smith.

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