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Smith defends means-testing of pensioners

Replacing means-tested pension benefits with a flat-rate pension payable to all would hit the poorest pensioners by £17 a week, says pensions minister Andrew Smith.

Reaffirming the Government&#39s commitment to the pension credit, which comes into effect in April, Smith told delegates at the Taxbriefs conference in London last week that the UK&#39s current state pension funding is affordable and sustainable.

He argued that targeting poorer pensioners with means-tested benefits is more important than removing the disincentive to low earners to save caused by the pension credit.

Smith said the introduction of the Sandler suite of stakeholder products will make it more economical for the financial services industry to sell simple products to those on lower incomes.

He added that the introduction of statutory moneypurchase illustrations will make people more aware of the need to save for retirement.

But NAPF chairman Peter Thompson said means-testing will hit 50 per cent of pensioners when the pension credit is introduced in April, rising to 70 per cent of pensioners by 2020.

Smith said: “Those calling for a higher basic state pension would have to explain why future generations would have to pay higher taxes. Without raising taxes, you could increase the basic state pension across the board by £10 but this would leave the poorest pensioners £17 a week worse off.”

Thompson said: “Paying more basic pension and taxing the better off is the same as means-testing 70 per cent of pensioners, except you do not have the massive hard cost of actually doing the means-testing.”

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