Radical shake-up of state pensions is 'fair', Prime Minister insists

 

David Cameron today defended the Government's plan to introduce a single "flat-rate" state pension which could result in some workers facing higher National Insurance contributions to pay for it.

Mr Cameron said plans for a unified pension rate - equivalent to around £144 in today's money, and due to be introduced for new pensioners from 2017 was "fair".

"This will help a lot of women and a lot of lower paid workers who otherwise wouldn't get a decent state pension," said Mr Cameron.

Ministers said the reform will create a simple flat-rate pension set above the means test (currently £142.70) and based on 35 years of National Insurance contributions, and will "hugely benefit" women, low earners and the self-employed, who under existing rules find it almost impossible to earn a full state pension.

However around six million workers will face higher National Insurance payments in future as the practice of "contracting out" the state second pension to employers is ended.

Those affected are expected to include more than a million private sector staff enrolled in final salary schemes, and an estimated five million public sector workers.

The GMB union said there could be "very serious consequences" which could affect an agreement on public sector pensions, while the National Pensioners Convention (NPC) described today's White Paper as little more than a "con trick" for future generations, by offering them less than they get now, asking them to pay more and work longer before they can get it back.

But ministers will argue that, by replacing today's complex system of add-ons and means-testing, the single tier will provide certainty to people about what they will get from the state and provide a better platform for them to save for their retirement.

Work and Pensions Secretary Iain Duncan Smith said: "This reform is good news for women who for too long have been effectively punished by the current system.

"The single tier will mean that more women can get a full state pension in their own right, and stop this shameful situation where they are let down by the system when it comes to retirement because they have taken time out to care for their family."

Pensions Minister Steve Webb said: "The current state pension system is too complicated and leaves millions of people needing means-tested top-ups. We can do better.

"Our simple, single tier pension will provide a decent, solid foundation for new pensioners in an otherwise less certain world, ensuring it pays to save."

Brian Strutton, national officer of the GMB union, said a new flat-rate pension should be fairer than the present arrangements, but warned of a "very serious consequence" of the Coalition's plans.

"That is the increase in National Insurance contributions that employers and employees in defined benefit pension schemes will have to pay," he said.

"For employers that is 3.4% of the NI ranking earnings and for the six million employees affected it will be an extra 1.4%. Most DB scheme employers and members will find this unaffordable so will need to renegotiate their schemes.

"A good example is the Local Government Pension Scheme which has just been reformed by unions and government and would face an unaffordable extra NI bill of several hundred million pounds.

"Just as the Treasury legislation to reform public sector pensions is going through Parliament, the Department for Work and Pensions (DWP) is proposing to blow it all out of the water by completely rewriting the state and occupational pension landscape."

Mr Strutton said the Treasury and DWP needed to "get their act together" to avoid reopening the public service pension deals, adding: "Abolition of the contracting out NI rebate will impose a £6 billion new tax burden on workers and companies which may be a nice windfall for the Chancellor but is not fair to those who will have to pay more tax."

Unions have been embroiled in a bitter dispute with the Government over its controversial public sector pension reforms, which led to a series of strikes.

An agreement was struck in local government, but unions in other areas have refused to sign up to new arrangements.

NPC general secretary Dot Gibson said: "The White Paper offers nothing to existing pensioners and leaves many of them to struggle on lower pensions and a complicated means-testing system.

"The worst affected will be around five million older women who don't have a pension anywhere near £144 a week and would clearly benefit if they were included in the new arrangements, but look like they are going to miss out.

"This will only add insult to injury to millions who have already made a contribution to our society but are still living in poverty.

"The outlook for future generations of pensioners is even worse. They are being asked to pay an extra five years worth of National Insurance contributions, work longer before they can retire and end up with less than they can get today. At the moment you only need to contribute for 30 years in order to get a full state pension, and if you do, you can get £150 a week when you retire at 65.

"What the Government is trying to sell is a plan for people to pay in for 35 years, get £144 a week and have to wait at least until 68 before they can collect it. No-one should be taken in by what is little more than a con trick."

Shadow pensions minister Gregg McClymont said the Coalition had originally suggested the reforms would be introduced in 2016.

"The chaos surrounding the Government's relaunch gets worse and worse. These pensions proposals are just half a plan yet they are still delayed by a year," he said.

"With the granny tax, this Government has already established a track record of incompetence and secrecy so we will look at the detail, but the Government should come clean immediately and set out exactly who the losers are."

Joanne Segars, chief executive of the National Association of Pension Funds, said: "The end of contracting out will become a key issue in both the private and public sectors as the Government moves towards a much-needed overhaul of our state pension.

"The transition will have to be handled very carefully to ensure a fair result for employers and savers."

Arts and Entertainment
'A voice untroubled by time': Kate Bush
musicReview: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Life and Style
Cooked up: reducing dietary animal fat might not be as healthy as government advice has led millions of people to believe
healthA look at how governments started advising incorrectly on diets
News
peopleJustin Bieber accuses papparrazzi of acting 'recklessly' after car crash
Life and Style
tech
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
people
Voices
voices
Arts and Entertainment
Oppressive atmosphere: the cast of 'Tyrant'
tvIntroducing Tyrant, one of the most hotly anticipated dramas of the year
News
i100
News
Ukrainian Leonid Stadnik, 37, 2.59 meter (8,5 feet) tall, the world's tallest living man, waves as he poses for the media by the Chevrolet Tacuma car presented to him by President of Ukraine Viktor Yushchenko in Kiev on March 24, 2008.
newsPeasant farmer towered at almost 8'5'' - but shunned the limelight
News
Walter Matthau and Jack Lemmon in ‘The Front Page’, using an old tech typewriter
media
Life and Style
Could a robot sheepdog find itself working at Skipton Auction Mart?
techModel would allow robots to be programmed to control crowds and save people from burning buildings
News
i100
Arts and Entertainment
Suha Arraf’s film ‘Villa Touma’ (left) is set in Ramallah and all the actresses are Palestinian
film
Sport
Angel Di Maria poses with Louis van Gaal after signing for Manchester United
sportWinger arrives from Real Madrid and could make debut on Saturday
Arts and Entertainment
Kingston Road in Stockton is being filmed for the second series of Benefits Street
arts + entsFilming for Channel 4 has begun despite local complaints
Arts and Entertainment
Hooked on classical: cellist Rachael Lander began drinking to combat panic attacks
musicThe cellist Rachael Lander’s career was almost destroyed by alcohol she drank to fight stage fright. Now she’s playing with Elbow...
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Nursery Assistant/Nurse all cheshire areas

£7 per hour: Randstad Education Cheshire: We are a large and successful recrui...

Year 2 Teachers needed for day to day supply

£110 - £130 per day + Competitve rates of pay: Randstad Education Reading: Yea...

Digital Marketing Manager, Womens Fashion, London

£50-£60K Plus Benefits: Charter Selection: Highly successful leading women’s l...

Year 6 Teachers needed for day to day supply roles

£110 - £130 per day + Competitive rates of pay: Randstad Education Reading: Ye...

Day In a Page

Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?
Rachael Lander interview: From strung out to playing strings

From strung out to playing strings

Award-winning cellist Rachael Lander’s career was almost destroyed by the alcohol she drank to fight stage fright. Now she’s playing with Elbow and Ellie Goulding
The science of saturated fat: A big fat surprise about nutrition?

A big fat surprise about nutrition?

The science linking saturated fats to heart disease and other health issues has never been sound. Nina Teicholz looks at how governments started advising incorrectly on diets
Emmys 2014 review: Can they genuinely compete with the Oscars

Can they genuinely compete with the Oscars?

The recent Emmy Awards are certainly glamorous, but they can't beat their movie cousins
On the road to nowhere: A Routemaster trip to remember

On the road to nowhere

A Routemaster trip to remember
Hotel India: Mumbai's Taj Mahal Palace leaves its darker days behind

Hotel India

Mumbai's Taj Mahal Palace leaves its darker days behind
10 best pencil cases

Back to school: 10 best pencil cases

Whether it’s their first day at school, uni or a new project, treat the student in your life to some smart stationery
Arsenal vs Besiktas Champions League qualifier: Gunners know battle with Turks is a season-defining fixture

Arsenal know battle with Besiktas is a season-defining fixture

Arsene Wenger admits his below-strength side will have to improve on last week’s show to pass tough test
Pete Jenson: Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought

Pete Jenson: A Different League

Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought
This guitar riff has been voted greatest of all time

The Greatest Guitar Riff of all time

Whole Lotta Votes from Radio 2 listeners
Britain’s superstar ballerina

Britain’s superstar ballerina

Alicia Markova danced... every night of the week and twice on Saturdays
Berlin's Furrie invasion

Berlin's Furrie invasion

2000 fans attended Eurofeurence
‘It was a tidal wave of terror’

‘It was a tidal wave of terror’

Driven to the edge by postpartum psychosis