Simon Read: The Coalition is putting politics ahead of proper pension planning
What a poor week it's been for the Coalition Government. First Nick Clegg was forced into a grovelling apology for ripping up the Liberal Democrats' pre-election pledge to fight rises in student fees. Then David Cameron was reported as demanding a rethink of a flagship state pension policy that was set to introduce a flat-rate benefit of £140 a week for all pensioners.
The latter could lead to potential problems and confusion for millions. The news that there's been a rethink on the bold reforms of the state pension scheme announced by the Coalition soon after it came into power sent ripples of fear through the pension industry.
Steve Webb, the Pensions minister, confirmed on Wednesday in a speech to pension bigwigs that the policy is being watered down. Despite having promised to bring out a White Paper – setting out full details of the reforms – last spring, the Government has failed to deliver.
This week Mr Webb said that while a paper would be published this autumn, it won't – after all – be a prescriptive white one. Instead it will be a hybrid between an authoritative White Paper, which sets out policy, and a consultative Green Paper, which sets out topics to be discussed.
Despite announcing the reforms some 18 months ago, Mr Webb claimed: "There's a lot of detail and it's important to consult on that. I suppose you could call it [the autumn paper] minty."
What's the problem here? When the universal flat-rate state pension was first proposed it was acclaimed by virtually all parties. To remind you why, let's examine the current state pension system.
It's made up of three parts: basic state pension, second state pension (known as S2P), and pension credit. Workers need to have paid into National Insurance for 30 years to get the full basic state pension of – currently – £107 a week. Anyone paying in less gets paid out less.
So far, so clear. But then higher-earners pay more in National Insurance, so – through S2P – they can boost their state pension payout up to as much as £167 a week.
Understand? Hang on, there's more. A means-tested element – that's pension credit – allows low-earners to boost their basic entitlement to a minimum of around £142 a week.
Does all that sound fair? It's certainly confusing to me and, I suspect, most pensioners who end up getting less than they expected because of the complicated rules.
So the Coalition proposed to introduce from 2015 a simple system where all pensioners who had paid into NI for 30 years would be given a basic flat-rate of around £140 in today's money. Those who had paid in less would get less, as in the existing system.
The reforms not only simplify the state pension system, but the proposals are also budgetary neutral, which means, in short, they would cost us no more money.
They would also do away with the existing pension inequality. The current means-tested system has left many millions penalised for saving for their retirement, as those that have done absolutely nothing have simply qualified for bigger state payouts.
So we've been looking forward to the introduction of a simple-to- understand and fairer state pension scheme. That's crucial for all of us trying to plan ahead for retirement as, if we know how much we will get from the state, we can work out how much we need to save to boost our income to a decent level when we stop working.
With that in mind, why the backtracking this week? Experts blame political expediency. A flat-rate state pension would mean high-earners would lose their extra payouts. And, traditionally, which party do higher earners tend to vote for? Yes, the Tories.
The Government clearly didn't get its party political hats on when announcing the policy, as it's the timing that has seemingly thrown a spanner in the works. The reforms were planned to be introduced from 2015. But someone at Number 10 has presumably only just realised that alienating a lot of your traditional voters – the high-earners – just after the next election in 2014 is a little foolhardy.
So the Government will, it seems, delay the introduction of a flat-rate pension until some years later, so the issue doesn't become a political hot potato in 2014.
In doing so the Coalition has let us down badly. We need certainty in our pension planning, not political posturing.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Regular cast member Ste Hay, played by Kieron Richardson, is about to test TV boundaries
Simon Read: Don’t blow a fuse with your energy supplier, just switch
How not to go into the red over Christmas
How to cut the cost of car insurance: A five-step guide to getting a better deal
Simon Read: The only place for debt is out in the open, don't be afraid to ask for advice
Families pay the price of superfast broadband
- 1 Lee Evans announces retirement from comedy on The Jonathan Ross Show
- 2 Pirelli calendar 2015: The problem with 'plus-size' models like Candice Huffine
- 3 These grandmas smoking weed for the first time are wonderful
- 4 Woman opens professional cuddling shop – gets 10,000 customers in first week
- 5 Angelina Jolie confuses everyone with 'ay up me duck' East Midland's greeting to Derby actor Jack O'Connell at awards show
G20 summit: Enter Putin. Accompanied by four warships. To the sound of mockery
'Muslims pre-date Columbus in discovering America,' says Turkish president Erdogan
David Cameron 'compares Vladimir Putin’s Russia to Nazi Germany' ahead of tense meeting
Former Tory PM Sir John Major says 'we would not have an NHS without migrants'
France 'blocks' Russian sailors from boarding a warship
G20 summit: David Cameron warns Vladimir Putin that Russia's relationship with the West is at a 'fork in the road' over Ukraine
iJobs Money & Business
£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
$175 - $200 per annum, Benefits: full benefits: Carlton Senior Appointments: P...
Not specified: Carlton Senior Appointments: Senior MD Financial Advisor - San ...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens