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Topics: basic state pension| pension reform| coalition government| Ros Altmann| Tom McPhail
The state pension could be lifted to a £140 per week payment with no means testing, according to new proposals.
Currently, the basic state pension is £97.65 per week for single people, and pensioners may qualify for pension guarantee credit, savings credit, and around 30 extra benefits including winter fuel allowance.
The coalition government says removing means testing and paying all pensioners a flat rate will reduce bureaucratic costs and end the ‘indignity' of means testing.
Plans from work and pensions secretary Iain Duncan Smith and pensions minister Steve Webb would mean pensioners get a yearly income of £7,280, or £14,560 for couples.
The proposals are expected to be detailed in a Green Paper before 2011, and ministers aim to introduce the changes by 2015.
"The fundamental problem is that our state pension system undermines private pension saving," says Ros Altmann, director-general of Saga.
"If around half of pensioners are entitled to means tested benefits, their private pensions will be penalised and some may see their whole private pension effectively taken away.
"As we are about to launch a national system of auto-enrolment, and a new national pension scheme specifically targeted at low to moderate earners, we would be at risk of putting these workers into a pension which would ultimately be partly or totally removed from them by the means-test."
Tom McPhail, head of pensions research at Hargreaves Lansdown, adds: "With this reform we would finally achieve a simple, transparent and functioning pension system which would encourage everyone to save for their retirement."
"Final salary scheme members may not welcome this news as it may well mean the end of contracting out for final salary schemes, which in turn will mean a 1.6% rise in their National Insurance rates.
"This will be particularly relevant for public sector scheme members who are already facing a 3% increase in their contributions."
McPhail says the change to state pensions could lead to a ‘bonanza' of contacting out into money purchase pensions, as investors can receive rebates into SIPPs or personal pensions for the next two years.
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SERPS & NEW SUGGESTED PENSION
My current State Pension exceeds £140 due to Serps content. I am now knocking 79 and my wife & I are living off modest pensions. As the older and perhaps more worn out partner on my demise my wife should inherit 100% of my serps. Surely we are not about to lose out because we saved sensibly and invested in serps!! To add insult to injury we were stupid enough to invest a small amount with EQUITABLE LIFE - double whammy!! I do hope that Iain Duncan-Smith will protect people with the 2nd Serps Pension.
Posted by: G. A. MILNES
SERPS
My position is the same as Mr. G.A. Milnes. I was encouraged by the Government of the day to Contract In and through SERPS build up my future pension to something that would provide a reasonable existence for my wife and myself in the future. Through the actions of the last labour government together with bankers greed etc. my private pension was decimated. This then made the SERPS part of my pension very important and due to my earnings over the years my accrued rights in SERPS is substantially greater than the basic state pension. My wife receives the basic state pension. I hope there is no way that in the current plans the goverment can take away the legally Accrued Rights to the second state pension and leave us with £280 which would be devastating and probably cause us to have to sell our house. The pension I am paid was earned through a lifetime of hard work and I trust that the Conservative Party, for whom I have voted all my life, will respect this ethos
Posted by: j, parkinson
2015
To be introduced in 2015? Flaming Nora, half of us receiving pensions now will probably be dead by then!!!
Posted by: rightenough
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SURPS re £140 a week pension
I would like to know what then happens to those of us who spent years contributing to SURPS. I my case a private pension bought into SURPS who apparently guaranteed that additional pension income. How can the Government expect us pensioners to encourage our children to save for old age. I can only recommend they spend the lot it will make no difference.
Posted by: Cosgrove