View more on these topics

Wide differences revealed in pension reform choices

The Government’s flat-rate state pension proposal would lead to lower maximum state pension payments than an acceleration of current reform plans for a two-tier flat-rate structure, according to the Pensions Policy Institute.

Last month, pensions minister Steve Webb outlined two options for fundamental reform of the basic state pension.

Option one would involve an acceleration of the existing reform agenda, so the state pension evolves into a two-tier flat-rate structure by 2020. Under current plans, this would happen in the mid-2030s.

Option two, described by Webb as the “more radical” reform option, would see the introduction of a single tier flat-rate pension of around £140 per week. In the most in-depth analysis of the two options to date, the PPI says the highest pension an individual could receive under option one in 2072, in 2011 earnings terms, would be £203. Under option two, the maximum state pension would be just £165. The PPI says if there are no reforms to the current pension system, the maximum possible total pension in 2072 would be £207 a week.

It says option one would see the upper limit for state second pension accrual cut from £40,040 to £14,400 by 2020, leaving a flat-rate S2P benefit of £1.60 per week for each qualifying year.

For a person with a full working life of 52 years under this system, this would mean a S2P benefit of £83.20 per week.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com