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State pension reform proposals delayed

Steve Webb 480 LibDems DWP

The Government has delayed the publication of a white paper on state pension reform until the autumn as ministers struggle to unravel the complexity of the current system.

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.

In a written statement published today, pensions minister Steve Webb (pictured) says: “Given the scale, complexity and importance of these two significant reforms we are still working on the details, to ensure we get them right.

“Therefore, we will set out further detail on both the single tier reform and state pension age review mechanism in a white paper in the autumn.”

Webb says the reforms will be introduced in the next Parliament.

Labour Shadow pensions minister Gregg McClymont says: “The DWP have undertaken to deliver this reform with no extra costs to the Treasury in any year. It is not clear how you do that without an enormous number of people losing out heavily.”

One issue the Government needs to resolve is the treatment of public and private sector workers who have contracted-out of the state pension.

Writing for Money Marketing in January, Hargreaves Lansdown head of pensions research Tom McPhail said: “The end of contracting-out would mean an increase in NI rates for the five million public sector workers who are currently contracted out through their final-salary schemes.

“It is a safe assumption they would react very badly to being asked to pay 1.4 per cent in NI on top of the 3 per cent increase in member contributions which the current Treasury-led reforms of public sector pensions have demanded.”

Saga director general Ros Altmann says: “It is crucial that the Government gets these reforms right, so i think it is worth taking a little bit longer if necessary.

“The complexity with contracting-out is enormous and there are certainly issued to be resolved with there. One concern is that the public sector pensions deal potentially precludes any further change to member benefits.

“However, public sector pensions and the state pension are inextricably linked by contracting-out.”

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. Nearly a pensioner 12th July 2012 at 11:53 am

    If the Government of the time when state pension were set up, and National Insurance was designed to pay for it, had ring fenced pensions into a “Pension Fund” and not allowed the money to go into the general coffers to be squandered at will by successive governments of any persuasion we might not be in the current situation. I mean what person in their right mind with any business sense would think to pay an ongoing liability out of current receipts rather than make proper provision, seems like a “Yes Minister” farce.
    When considering this George Osborne had better not forget the growing number of pensioners are more likely to vote than youngsters who have no interest in current political system caused by the unprincipled current and previous batches of self serving politicians of all parties.

  2. It’s just a ponzi scheme.

    Ultimately, it must fail.

  3. “to unravel the complexity of the current system”. The Government have a hard job doing this, how did they expect the recipients to understand?
    So learning from experience, how did they then manage to take the simple concept of Auto_Enrolment and convert it into Rocket Science?

  4. Why would anybody agree to remain in the new NEST scheme if the pension that built up merely replaced means tested benefits (pension credit) – as would be the case now. In order for NEST to have a chance of working we need to move to a flat rate state pension and remove the pension credit. Any delays in this simply reduce the effectiveness of NEST.

    The other point to bear in mind is that the sooner we move to a flat rate state pension the sooner we can get rid of the ambulance chasers who target clients contracted-out of SERPS as they may well actually be better off having done so!

  5. er, yes – “…struggle to unravel the complexity of the current system…”
    Doesn’t seem to stop them tinkering with it, though.

  6. Osbourne has made that many mistakes and U turns since he came into office it is litle wonder the country is going down th plug hole.
    The good thing is he will be out on his a**e at the next election with the posh boy from No 10

  7. The only aim of this government is to save money yet I doubt if any of them have ever been contracted in to SERPS or pension 2. Are those who have paid into the second state pension to lose all the benefits that they have accumulated if the universal l pension of £140.00 or £150.00 is introduced. Those contracted out through membership of a superannuation scheme will benefit greatly as their base pension will increase by almost £40.00. That is only looking at those who have been paying in over the last few years. However, I am sure that this Govt is more interested in the extra revenue to be had for those forced out of “contracting out” Am I too cynical?

  8. This should come as no surprise! The Minister, Steve Webb, condones the discrimination against 4% of the total UK Pensioners world wide that has been the policy of this and previous governments for over sixty years. – The Frozen Pension Policy.

    Live in the UK, EU or a select group on countries like USA, the Phillipines or Israel and the annual April index linked uprate is automatic. Live in, for example, Canada, Australia or Thailand and your pension is frozen from the first payment in the host country. Blatant discrimination.

    There is no legal justification – the ECHR ruling in March 2010 did not make uprating world wide illegal. There is no moral justification – contributed when working to the NI Scheme on the same terms as everyone else now, in retirement, should be allowed to withdraw on the same terms and conditions from the Fund.There is no financial justification – the ring fenced NI Fund is in current surplus of £38 BILLION and there is no administrative justification either as pensions are paid world wide already.
    The country of one’s residence is totally and utterly irrelevant.
    Webb tabled an Early Day Motion when in opposition calling for the abolition of this iniquitous policy; As the Minister now responsible he not only denies his pre election promises he completely but omitted mentioning these victims in his Green Paper…yet preached “fairness” as one of his basic principles!
    Trust him? – not even with my boy’s piggy bank.

  9. Nearly a Pensioner said : ” had ring fenced pensions into a “Pension Fund” and not allowed the money to go into the general coffers to be squandered …”
    The National Insurance fund is ringfenced.
    The government do borrow from it though through the Debt Management Office and have to pay interest on the loan which last year was of the order of 1.3 billion GBP. This is twice the amount required to pay ALL pensioners worldwide their rightful pension and stop the freezing of that minority.

  10. Nearly a Pensioner said : ” had ring fenced pensions into a “Pension Fund” and not allowed the money to go into the general coffers to be squandered …”
    The National Insurance fund is ringfenced.
    The government do borrow from it though through the Debt Management Office and have to pay interest on the loan which last year was of the order of 1.3 billion GBP. This is twice the amount required to pay ALL pensioners worldwide their rightful pension and stop the freezing of that minority

  11. Steve Webb has also said recently….
    “People really don’t want to work for a year and get a pension statement showing their savings have gone down not up.”
    Well Mr Webb – my wife and I worked for forty years and my UK State Pension is GUARENTEED under current UK legislation to go only in one direction – and that’s down!!!

    I’m afraid that when you also said……
    “As part of the options we offer people, we want greater certainty and guarantees or insurance to be on that list”
    Your words are hollow, without conviction and reek of dishonesty!!

    I say this because I am a “frozen” UK state pensioner – and if anyone doesn’t know what that is – well just read the previous comments by RobTheFox and Morego or better still – ask your MP!! Wikipedia’s got a good description of the punishment too!!

    Why would anyone believe you when in 2004 you said…..
    “All state retirement pensions in payment to pensioners living outside the United Kingdom shall be subject to annual uprating by the same percentage rate as is applied to such pensions payable to pensioners living in the United Kingdom.”

    And then in a response to a question in an interview with The Guardian in March 2012 you said….
    “We want all pensioners to have a decent and secure income in their retirement”

    Also in The Guardian’s interview you came out with …..
    “When people have saved for a pension, it is vital that they get the best possible pension out of it”

    This one’s quite good too when you stated to The Guardian again……
    “I’m absolutely committed to making sure that generations yet to retire have a decent state pension as a foundation and a pension of their own.”

    But this one takes the biscuit. It’s again from The Guardian in March 2012…..
    “The sooner you start, the sooner you will build up a ‘big fat pension pot’!”

    How can you spout so much rubbish when there are over half a million UK State Pensioners who have a pension that DECLINES every year – due to inflation – and due to your legislation??

    Why should ANYONE believe you – because I for one – and over half a million of other “frozen” UK expat state pensioners don’t!!!

  12. I believe that senior civil servants who in their final salary year receive large raises and bonuses are paid pensions in excess of their contributions. MPs and Lords are also paid pensions, mostly unearned, from the state pension pot. In other words, they have cleverly hidden their excessive pensions and this will eventualy help deplete the fund. They should pay into their own free standing funds and leave the state pension pot alone.

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