'Simpler' pension system welcomed

The Government today confirmed its plans to replace the current state pension with a simple, flat rate system that would pay around £140 a week.

Chancellor George Osborne said the current system was "unbelievably complex", leaving many people unsure about how much they would receive from the state and whether savings they made would be clawed back through the loss of means-tested benefits.



The new system will provide a flat level of support, which is greater than the amount people currently receive through the basic state pension and means-tested pension credit.



It will still be based on contributions and will not cost more than the current system. The reforms will not apply to today's pensioners and are likely to take years to come into effect.



The Department for Work and Pensions will publish a Green Paper shortly, looking at the options for reform.



Work and Pensions Secretary Iain Duncan Smith signalled that the Government planned to reform the state pension earlier this month, when he said he wanted a system that was easy to understand and rewarded those who saved.



A move to a flat-rate system is likely to particularly benefit women, who often do not receive a full state pension as a result of taking time out of work to look after children.



It would also help people who currently qualify for the pension credit, but do not claim the money, either because they think the process is too complicated, or because they find it demeaning.



The case for reform has become particularly pressing ahead of moves to auto-enrol workers into company pension schemes from 2012.



The Government has been warned that if it does not simplify the system it could face a major mis-selling scandal in future years, when people who had saved only modest amounts found they would have been better off not to have bothered.



Joanne Segars, chief executive of the National Association of Pension Funds, welcomed the move.



She said: "This is a turning point for pensions in the UK. Over half a million new pensioners a year will get a simpler and more generous state pension, and reliance on means-tested benefits will be slashed.



"For too long we have put up with one of the most complicated and meanest state pensions in Europe.



"This reform provides a clearer foundation for saving for old age. For the first time in a generation, people will know that it pays to save."







Helen White, acting director of life and savings at the Association of British Insurers, said: "The announcement to establish a flat-rate payment is an important move towards a simpler and more understandable pension system.



"It will help people plan for their retirement, stop people falling into the means-testing trap and ensure that it always pays to save."



But shadow pensions minister Rachel Reeves said: "Yet again the Government have announced a flat-rate pension with no details at all.



"While we continue to support the simplification of the state pension system, the Chancellor's statement is just another promise of 'jam tomorrow' that does nothing for pensioners today."



The Chancellor also announced plans to look at automatically increasing the age at which people can start drawing their state pension in line with rises to life expectancy, to ensure the cost of people living longer is shared more fairly between the generations.



Mr Osborne also said the Government accepted former Labour Minster Lord Hutton's proposals to reform public sector pensions as a basis for consultation with workers and the unions.



The proposals include moving workers off final salary pensions onto ones based on average earnings during their career, and increasing the normal pension age to be the same as the state pension age.



Mr Osborne added that similar changes should be made to MPs' pensions.

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: Clinical Lead / RGN

£40000 - £42000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: IT Sales Consultant

£35000 - £40000 per annum: Recruitment Genius: This IT support company has a n...

Recruitment Genius: Works Engineer

Negotiable: Recruitment Genius: A works engineer is required in a progressive ...

Recruitment Genius: Trainee Hire Manager - Tool Hire

£21000 - £25000 per annum: Recruitment Genius: Our client is seeking someone w...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
Markus Persson: If being that rich is so bad, why not just give it all away?

That's a bit rich

The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

Coleman on course to end half a century of hurt for Wales

Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference
Rugby World Cup 2015: The tournament's forgotten XV

Forgotten XV of the rugby World Cup

Now the squads are out, Chris Hewett picks a side of stars who missed the cut
A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past
The Queen has 'done and said nothing that anybody will remember,' says Starkey

The Queen has 'done and said nothing that anybody will remember'

David Starkey's assessment
Oliver Sacks said his life has been 'an enormous privilege and adventure'

'An enormous privilege and adventure'

Oliver Sacks writing about his life
'Gibraltar is British, and it is going to stay British forever'

'Gibraltar is British, and it is going to stay British forever'

The Rock's Chief Minister hits back at Spanish government's 'lies'
Britain is still addicted to 'dirty coal'

Britain still addicted to 'dirty' coal

Biggest energy suppliers are more dependent on fossil fuel than a decade ago
Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition