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UK pensions to rise? PDF
Saturday, 30 October 2010 00:00
 

Everyone is to receive a state pension of £140-a-week, according to plans for a radical shake-up of state pensions announced earlier this week by the UK coalition government.

The system will be simplified and there will be an end to means-tested top-ups, such as pension credit.

Under the current system, a single person who has reached retirement age, receives £97.65 a week and a couple £156.15, with an extra means-tested amount available for the poorest pensioners.

The changes, which are due to be detailed in a green paper by the end of the year, mean a single person could receive £7,280 a year and a couple £14,560.

Ministers calculate that removing means testing and the resulting reduction in bureaucracy will save around £6bn a year. They believe a single-tier system would also reduce reliance on benefits.

The changes are likely to benefit married couples and stay-at-home mothers the most, as the latter often fail to qualify for the full basic pension because they have taken time out from work and have not built up enough national insurance contributions.

The plans are being drawn up by Iain Duncan Smith, the work and pensions secretary, and pensions minister Steve Webb. They hope to cut pensions spending, which was around £66.9bn last year, although the reforms would need to be approved by the Treasury before they could go ahead.

"The current system is very complex," said a senior coalition source. "It forces too many older people to be reliant on means testing, with many not taking up the support offered by the state. Too few are rewarded for working and saving, and it generates unequal outcomes for men and women. A radically reformed state pension will reward people who work and save, clarify the deal for future pensioners, and simplify the role the state plays in providing a clear and solid foundation for old age."

A Department for Work and Pensions spokeswoman said that the proposals would make the pensions system easier to understand. "The chancellor has confirmed that the government will improve the quality and accessibility of pensions in the spending review period," she said.

"We will be bringing forward proposals for reform in a green paper later this year. Our aim will be a simple, decent state pension for future pensioners, which is easy to understand, efficient to deliver and affordable."

Somewhat worryingly for UK pensioners residing abroad, it was originally stated that the new system would be based on residency instead of contributions, but this was later denied.

If Duncan Smith's plans go through, it remains unclear when the reforms are likely to be applied.

Responding to the planned changes, Ros Altmann, a former pensions consultant to the Treasury and the newly appointed director-general of Saga, said: "A full-rate citizens' pension would be the most fantastic reform. The current system was designed decades ago by men and for men. It isn't fair to women."

For an analysis of what £140 a week really means, read Patrick Collinson of the Guardian by clicking here.

© Paul Whitelock

Tags: state pension, pension credit, retirement age, coalition government, green paper, basic pension, national insurance contributions, Iain Duncan Smith, Steve Webb, Department for Work and Pensions, Ros Altmann, Saga, Patrick Collinson, Guardian, Paul Whitelock, www.a1-solutions-spain.com

 

Paul Whitelock

Paul is a Joint Honours graduate in Spanish and German, a qualified teacher (PGCE) and has a Member of the Institute of Linguists (MIL) qualification.

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