'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
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
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

Recruitment Genius: Account Manager

£20000 - £35000 per annum: Recruitment Genius: This full service social media ...

Recruitment Genius: Data Analyst - Online Marketing

£24000 - £35000 per annum: Recruitment Genius: We are 'Changemakers in retail'...

Austen Lloyd: Senior Residential Conveyancer

Very Competitive: Austen Lloyd: Senior Conveyancer - South West We are see...

Austen Lloyd: Residential / Commercial Property Solicitor

Excellent Salary: Austen Lloyd: DORSET MARKET TOWN - SENIOR PROPERTY SOLICITOR...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there