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Twin threats to flat-rate state pension

Fears are growing that the Government will water down its state pension reforms as DWP and Treasury officials continue to grapple with the cost and complexity of introducing a flat-rate benefit.

In December, Money Marketing revealed the Department for Work and Pensions had been forced to delay its green paper on the introduction of a universal state pension for future retirees.

It is understood that officials were attempting to resolve how to treat people who have accumulated contracted-out benefits in Serps and the state second pension.

In a subsequent interview with Money Marketing earlier this month, pensions minister Steve Webb confirmed officials in Whitehall are considering “a number of options” for state pension simplification. He insisted no final decision has been made.

Barnett Waddingham partner Malcolm McLean says: “For the life of me, I do not know how they are going to deal with people’s accrued rights to Serps and S2P.

They have got themselves in a bit of a corner on this one. My worry is that they will produce a watered-down green paper that is full of questions without anything actually being proposed.”

Legal & General pensions strategy director Adrian Boulding believes introducing a universal state pension is “mired in costs”. He says: “It has got to be a super long-term ambition because in the short term the finances will be very challenging. I think it can be done but the main problem is cost.”

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