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Time has come for citizen’s pension

The Scottish National Party has promoted the idea of a citizen’s pension. Under our prop-osals, each single pensioner would get 110 a week, with each couple getting 168.

These figures would thereafter be linked to average earnings. We believe this proposal would not only ensure that every pensioner had a decent state pension which would raise them out of poverty but would also provide a firm foundation for savings, allowing pensioners who have savings or a small private pension to get the benefit of that.

At present, such savings or pensions disappear into the means-testing system.

Such a radical change is desperately needed. Under the present system, the Government expects that over a quarter of all pensioners will not take up their entitlement. More than half of all pensioners were entitled to means-tested benefits on their introduction and on current projections, threequarters of pensioners will be entitled to means-tested benefits by 2025.

When in opposition, Lab-our lambasted the Tories for cutting the link between pensions and earnings while the Tories resolutely defen-ded the policy.

In the topsy-turvy world of UK politics, Labour ref-uses to countenance restoring the link and indulge in a complex system of pension credits while the Tories claim they will restore the link despite the fact that Michael Howard still defends the original decision to end it.

Means testing also creates a disincentive to save. Many people on low to moderate incomes have no clear incentive to save since modest pension savings may merely disqualify individuals from getting the meanstested guarantee credit.

Many pensioners with small superannuation or private pensions feel very agg-rieved. Women and Carers, in particular, suffer under the present system since only 18 per cent of women get the full basic state pension in their own right, mainly because they take time out of the labour market to care for children, elderly or disabled relatives.

The citizen’s pension can be paid out of existing Government spending on pensions. To fund the citizen’s pension, we would use res-ources currently allocated to the basic state pension and the pension credit and savings from the reform of tax relief.

The arguments in favour of a citizen’s pension are gaining ground. The Nat-ional Association of Pension Funds has indicated that the establishment of a citizen’s pension is possible.

Even the Liberal Dem-ocrats have come over partially to the idea by proposing one for over-75s. Work and Pensions Secretary Alan Johnston has recently spoken approvingly of the idea and in a recent Parliamentary ans-wer to my question, pensions minister Malcolm Wicks said that the idea is worth consideration.

At present, one in five pensioners in Scotland are living in poverty. Tinkering around the edges of the current state pension system is not enough. It is time for decisive action. The citizen’s pension is an idea whose time has come.

The state pension is, however, only one aspect of future pension provision. Increasingly, there is a gap between what people are saving and their expectations of a decent retirement income and we believe that action needs to be taken to tackle that problem.

Under our pension proposals, we also acknow-ledge that we need to take action to encourage younger people to save towards their retirement and that there may have to be an element of compulsion.

Any such system would, however, have to involve both employer and emp-loyee and ensure that it takes account of people on low incomes who would find it almost impossible to save any realistic amount towards retirementWe also propose a change from the current system of tax relief on pension contributions to a system of match funding for pension savings. A ceiling would, however, be applied to ens-ure that the system is fair and progressive.

This system will provide greater incentives to save, particularly for those on lower and modest incomes because it is simple, transparent and people will be able to see their pension funds grow.

Under our proposals, no one would be compelled to save into a private sch-eme but would have the option of savings into a Government-guaranteed state pension fund.


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