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.
Debt in Britain: Numbers seeking help on how to cope with mounting bills goes up by more than half in three years
General election 2015: David Cameron's promise brings uncertainty to investors
Bargain Hunter: BT improves its mobile reception with 'incredibly competitive' deals
Have a happy new financial year
Simon Read: 'It went below the radar but you could be eligible for a tax break on your savings'
- 1 Replica Back to the Future Hoverboard released
- 2 Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
- 3 Brixton squat flats now costing up to £3k per month show how out of control rent is in London
- 4 Gamers confess the worst things they've done in The Sims
- 5 Dylan Moran on quitting smoking, being about as sexy as the Pope and why comedy panel programmes are 'c*ck shows'
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
The West has it totally wrong on Lee Kuan Yew
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
iJobs Money & Business
£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...
£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...
Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...
£150 - £190 Daily Rate: Sheridan Maine: One of London's leading water supplier...
Day In a Page
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
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
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
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000