pensions

THE Chancellor's fast-tracking of the new state pension will head off a looming injustice for 85,000 women, but could heap more pressure on the best surviving workplace pension schemes, experts said.

George Osborne confirmed his weekend revelation that the new £144-a-week single-tier state pension will be introduced in April 2016, so that all women whose state pension age has been raised twice will now be included.

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A proposed 12-month delay between the green and white papers on the issue had caused uproar among older women, particularly 85,000 born between April and July 1953 who would have missed out because their state pension age was rising at the same time as the reform was being introduced. Men born on the same day, meanwhile, would have been on the new pension.

Pensions campaigner Dr Ros Altmann said it had been "problematic for the Government to defend a delay in introducing the new state pension for these women", who she said had been gathering significant support in their fight to be eligible for the new state pensions.

However, she added: "There is another group of 350,000 women, born between April 1952 and April 1953 who were also being left on the old state pension system while men born on the same day would be in the new system, and the Government has not addressed this issue."

Scottish Pensioners' Forum spokesman Eddie MacDonald said: "This new pensions legislation will only apply to people of pensionable age from 2016 onwards. Meanwhile, the pensioners already condemned to poverty under the current system will continue to struggle to make ends meet through means testing. It's shambolic.

"Although our organisation has been campaigning for many years for an end to means testing, the Budget announcement shows no end to that and is simply a clever way of disguising what will actually be in place for pensioners, a two-tier pensions system by another name.

"We are calling for a universal state pension for all, regardless of when pensionable age is reached, and we feel this is the only way forward to ensure a fair and equal system for all pensioners."

The reforms spell an end to "contracting out" of occupational pension schemes, which saw employees and employers on final-salary pensions opt out of the second state pension, instead paying their money into their pension scheme while making reduced National Insurance contributions.

Mr Osborne said private-sector employers could "adjust their pension benefits to accommodate the extra cost". Public-sector employees would also pay the higher NI rates from 2016 but in return would get a larger state pension than before.

"Someone who is 40 years old when the single-tier pension is introduced, and who has always been contracted out, will pay an extra £6000 in national insurance over the rest of their working life, and in return get an extra £24,000 in state pension over the course of their retirement," Mr Osborne said.

But Unison's Scottish Secretary, Mike Kirby, said: "The single-tier state pension to be introduced from 2016 will present many more losers than winners, a £6 billion windfall for the Treasury from 2016/17, alongside big national insurance increases from the ending of contracted-out rebates on NI for those who've been providing for life after work through occupational pension schemes."

The National Association of Pension Funds (NAPF) reiterated its warnings about the tight timetable for schemes to adjust to the new deadline.

The NAPF chief executive, Joanne Segars, did, however, welcome the Chancellor's liberalising of rules guiding the Pensions Regulator. It will be set a new more flexible objective which takes more account of the growth prospects of the business.

"This should give businesses running final-salary pensions some much-needed relief from the effects of low gilt yields and quantitative easing," she said.