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Universal state pension is put on fast-track route

The Government has paved the way for a universal state pension following the introduction of an amendment allowing policymakers to fast-track consolidation of the state second pension.

Money Marketing last month revealed that the Government’s proposed green paper on introducing a flat-rate basic state pension had been delayed as officials tried to resolve how to treat people who have accumulated contracted-out benefits in Serps and the state second pension.

The amendment to legislation, contained in the Pensions Bill and put before the House of Lords last week, allows the Government to introduce the start date for consolidating the S2P on the order of the Work and Pensions Secretary. Under previous proposals, it would have been linked to the introduction of the flat-rate pension.

Pinsent Masons head of strategic development for pensions Robin Ellison says the move gives the Government flexibility to accelerate simplification of the state pension system.

He says: “At the moment, introducing a citizen’s pension is bedevilled by the mathematics of trying to work out who has got a basic state pension, a state second pension, is it contracted in or contracted out? It is just a nightmare. Once you plot to get rid of the second state pension and you go to a basic state pension, then you just change the rate of the basic state pension. It is much easier.”

The Bill puts into legislation the rules surrounding the introduction of automatic enrolment, the switch in pensions indexation from the retail price index to the consumer price index and a rise in the state pension age for both men and women to 66 by 2020.

Also included are measures to ease the burden that auto-enrolment places on employers, including a reduction in administrative red tape, and allows firms a three-month grace period before they have to enrol employees.

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