? Retirement age may be linked to life expectancy
? Green paper says scheme will honour accrued rights
Ministers are to outline plans for a universal state pension which they say will help those now in work prepare for a "different sort of world" in retirement.
Pensions minister Steve Webb said that Monday's green paper on pension reform outlining a single flat rate pension worth �155 a week would simplify a complex system and provide more incentive for people to save. The beneficiaries of the flat rate pension, due to come into force in five years, would be women, the low paid, carers and the self-employed.
Webb described the changes in life expectancy as "staggeringly mind blowing", saying one in six people alive today will live until they are 100, "meaning that we will all have to work for longer and save more".
"Tomorrow's pensioners do face a very different world," he told the BBC Radio 4 Today programme.
"They will, on average, be working for a lot longer, they will be retired for longer, they won't on the whole have final salary guaranteed pensions in the way that perhaps their parents did. We therefore need a simpler, clearer foundation because more of them will now be asked to save for their retirement."
The green paper will also canvass views on plans for a mechanism to automatically increase the state pension age in line with average life expectancy, rather than the system of pensionable age being set by ministers.
Webb said it was vital to make the reforms since the government is introducing auto-enrolment for workplace pensions. "That is focusing the issue. This is not techy marginal stuff. This is 10 million people of working age over the next five or six years. It is a kind of social revolution.
"They will be free to opt out, but their employer will put money in, they will put money in, tax relief goes in and they will have to decide whether to stay in the scheme or not. This is a huge opportunity for us to get people saving, but we will blow it if they take one look and think it is too baffling, they don't know what they will get or think 'why should I bother because the state will pick me up'."
The current state pension system, he said, was a confusion of contributory years, Serps and second state pension (S2P), and pension and savings credits. The single state pension, by contrast, will do what it said on the tin ? pay a flat rate, �140 a week at today's levels or about �155 when it is introduced in 2016 ? to everyone who has accrued National Insurance contributions or credits for 30 years.
Webb stresses that the changes are cost neutral, but they would not come without a cost for many employees. Under the current system, employees accrue pension rights through the basic state pension which pays up to �97 a week, and S2P which pays more depending on how much NI a person paid in work.
The amounts involved can be considerable: those at the top end of the salary scale can expect combined state pensions of �180 a week. But those in low paid jobs might get a few pounds while the self employed and those who have spent their lives doing unpaid work get nothing at all. Webb says: "Women have had worse pension outcomes for a variety of reasons, such as childcare or looking after elderly relatives. There has been no protection for them under Serps and then S2P."
Under the proposals, S2P and the savings part of the pension credit will be scrapped, and savings used to boost the basic state pension. Webb says this means "a year bringing up your kids or looking after an elderly relative is going to be just as good as a year spent running a multinational company. There will be no difference in terms of state pension in terms of these two activities. So while the state system at present reinforces the inequality in wages, the new system will become flat rate. That will radically shift the relative position of women in the state system".
This redistributive move ? "progressive is the word I prefer," says Webb ? is unlikely to appeal to traditional Conservative voters, but Webb promises they will not lose the Serps and S2P benefits they have accrued. "I'm not taking any money away. We will honour everything that has been accrued to date." Nor is he intending to leave people without a safety net: the guaranteed part of pension credit, worth up to �35 a week, will remain in force for those who fail to build up 30 qualifying years of NI contributions or credits.
Only those who leave the UK to work abroad or serve time in prison will not benefit from the new scheme, although he adds that the government is considering introducing a minimum floor for the number of years someone must pay NI contributions before getting any state pension. This is likely to be about seven years.
Nevertheless, Webb has been the subject of a campaign by thousands of women in their late fifties, many of whom will find themselves working for a year longer than they expected before drawing state pension. Ros Altmann, director general of Saga and an adviser on pensions to the last government, has been critical of the move.
"The government has suddenly moved the goalposts on these women," she said. "This further increase was not mentioned before the election and, indeed, the coalition agreement stated that women's state pension age would not rise above 65 before 2020."
Webb is unrepentant about this change, a result of the government's move to speed up the increase in state retirement age to 66 by 2020. He says: "They are particularly the people who are going to benefit from this change [to the flat rate pension]. Women in their late fifties who raised children in the 80s have poor state pension records. Even at the age of 68, people are going to have two decades of retirement. It isn't work till you drop. We spend 30% of our adult life retired. If we don't do something about the retirement age, it will be 40% retired."
The current generation of pensioners are also fuming because they are not going to be included in the move to a single flat rate. Webb plans to leave them on the current level of pension payments, albeit rising in line with earnings from 2012 (another change introduced by Webb of which he is very proud). "The link to earnings was a demand around for 30 years, and we did it in a couple of months. It will be serious money in the long term" he said.
Source: http://www.guardian.co.uk/money/2011/apr/03/state-pensions-retirement-age
Celestine Babayaro Global economy Cornwall Students Eric Pickles Russell Brand
No comments:
Post a Comment