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Tories and LibDems set for battle over state pension reforms

Steve Webb 480 LibDems DWP

State pension reform is set to become a key Coalition battleground after reports emerged suggesting prime minister David Cameron is pressing for a rethink.

The Financial Times this week reported that Cameron wants the Department for Work and Pensions to look again at proposals to introduce a new flat-rate state pension worth £140 a week for future retirees.

Policymakers are likely to be concerned about the reaction of current retirees who will not benefit from the changes. Some people may also lose out through the loss of the state second pension while scrapping contracting out for defined-benefit schemes could see public sector workers making extra contributions.

Senior LibDem backbencher Stephen Lloyd says: “The policy is still absolutely rock solid. I spoke with [pensions minister] Steve Webb this morning [Tuesday] and he said the Government is absolutely committed to introducing the single-tier state pension.

“I am not even contemplating the options if anyone wobbles because I take Steve at his word. A lot of sensible Conservatives know this is a good thing.”

However, Cicero Consulting chief corporate counsel Iain Anderson says the reforms remain under discussion in Whitehall.

He says: “This is about David Cameron looking at his voting base and deciding whether now is the right time to reform the state pension from a political perspective.

“State pension reform is a signature policy for the Lib Dems and for Steve Webb. I would expect them to kick back strongly on this, resulting in yet more coalition tension.”

Legal & General pensions strategy director Adrian Boulding says: “The main issue is those who lose out from the reforms, because if it is cost neutral there will have to be winners and losers.

“I do not think it can be done at nil cost to the taxpayer because of the losers. The Treasury will need to put some money in to make this happen.”

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  1. Reform is essential and inevitable. Flat rate pension should be applied to all. Introduce a new supplementary welfare benefit (non-pension, but independent of other means-tested benefits) that can be claimed by current retirees who will suffer. In this way, the pension system is not clouded by different tiers and the supplementary benefit will fall out naturally over time.

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