Poor to win in pension revolution

A REVOLUTION in pensions was unveiled by the Government yesterday as it promised extra cash for the poor and incentives to persuade middle-income groups to provide for their retirement.

Alistair Darling, Secretary of State for Social Security, said his "radical new contract" would double the pensions of people earning less than pounds 9,000 and lift many workers, mothers and carers off means-tested benefits in their old age.

His Green Paper received a lukewarm reception from several Labour MPs, who said it would deepen Britain's "morass of means-testing". They were disappointed that ministers backed away from a compulsory pension scheme encompassing the well-off and the poor.

Instead, Mr Darling announced higher national insurance rebates in a pounds 500m-a-year subsidy to encourage middle-income groups earning pounds 9,000 to pounds 18,500 to join "stakeholder" schemes run mainly by the private sector. He feared that a universal scheme, in which the rich subsidised the contributions of the low-paid, would be seen as a breach of New Labour's key pledge not to raise income tax.

Mr Darling said poor pensioners would be protected by a new guaranteed minimum pension from April and hoped that over the long term this would rise in line with earnings, rather than prices, so it maintained its value. The pledge failed to quell criticism by Labour MPs, who said the guarantee would extend means-testing and be a disincentive to people joining the stakeholder schemes.

Frank Field, who resigned as minister for welfare reform in July after failing to win Tony Blair's backing for a compulsory-for-all scheme, led the criticism. "It means that if you don't bother to save you will just pick up this [guaranteed minimum] pension at the end anyway. So the Jack the Lads who don't intend saving will benefit."

He said the Green Paper failed to treat the poor as "equal citizens", and he feared that future politicians would seek to unwind the proposed system. "I doubt whether the settlement will last. It is doubtful whether it is fair," he said.

Other Labour MPs said the minimum pension guarantee, which in effect builds income support into the state pension, would still leave old people with the "stigma" of having to claim it. Paul Flynn, MP for Newport West, said one million elderly people already missed out because they did not want the "charity" of claiming income support, and would not take up the new guarantee. "Why should we continue cheating them?" he asked.

Steve Webb, pensions spokesman for the Liberal Democrats, who back a compulsory system, said relying on incentives for middle-income earners would not solve the problem of future pensioner poverty.

Quentin Davies, Conservative spokesman on pensions, said anyone earning between pounds 15,000 and pounds 18,000 would be "completely barmy" to save under the scheme because they would be depriving themselves of thousands of pounds of means-tested benefits.

The charity Help the Aged said the Green Paper was "weak and disappointing".

Mr Darling insisted that his radical and affordable package would guarantee everyone a secure and decent income in retirement, and prevent millions more relying on means-tested benefits. He said a "convention of rocket pension scientists" could produce all sorts of clever schemes. "What I am interested in is what works," he said.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Interactive / Mobile Developer

£40000 - £45000 per annum: Recruitment Genius: This digital production agency ...

Recruitment Genius: PHP Developer - Midweight

£40000 - £45000 per annum: Recruitment Genius: This digital production agency ...

Recruitment Genius: Junior Front End Developer

£20000 - £30000 per annum: Recruitment Genius: This digital production agency ...

Recruitment Genius: Front End Developer - Midweight / Senior

£35000 - £40000 per annum: Recruitment Genius: This digital production agency ...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks