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.”