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Will Green Paper dig deep enough?

Is yet another pension reform going to ail to dig deeply enough to get to the root of the problem? Probably.

This is what we hear from senior Government sources which suggest that the Green Paper will not be able to deal with the boundary between state and private provision.

The ideal situation is for people to know what they will or will not get from the state, allowing them to decide what additional private provision they need.

The principle was recently promoted by the National Association of Pension Funds through its universal citizens&#39 pension.

At the heart of the matter lies the pension “credit” which penalises savings. The Government expects 57 per cent of pensioners to be means-tested next year and this could reach as high as 70 per cent in 20 years time.

The pension credit comes into force next year – too soon for it to be genuinely considered up for review. It is a classic piece of political firefighting which emerged when the state pension increased by a miserly 75p and the Treasury confronted one of the first serious challenges to its reputation. The problem is that it may not be politically possible, particularly at a time of falling tax revenues, to remove this anomaly.

There is still a lot that can be done to simplify matters – the Green Paper will almost certainly achieve some of its goals perhaps on the occupational side – although the industy will assume that it will also do some damage, particularly as the Government steadfastly refuses to call stakeholder anything other than a success.

One prediction we are sure of. If the boundary between state and private provision is not dealt with we will have to do it all over again in five years time.

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