Pension reform warning

Political Editor

Monday 14 January 2013

Plans for a radical shake-up of state pensions will be announced by the UK Government today amid warnings it will be little more than a "con trick" and could affect a hard-fought deal on public-sector pensions.

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The proposals include a single flat-rate state pension, of about £144, to be introduced for new pensioners from 2017 in a bid to simplify the system.

Ministers said the reform would create a simple flat-rate pension based on 35 years of National Insurance contributions, adding it would "hugely benefit" women, low-earners and the self-employed.

The SNP is considering a similar flat-rate pension plan if Scots opt for independence. The move is designed to bring pensions for men and women into line.Under the UK Government plans, about six million workers will face higher national insurance payments. Those affected are expected to include more than one million private-sector staff enrolled in final-salary schemes, as well as an estimated five million public-sector workers.The GMB union said there could be "very serious consequences" which could affect an agreement on public-sector pensions,Dot Gibson, NPC general secretary, said: "At the moment you only need to contribute for 30 years in order to get a full state pension, and if you do, you can get £150 a week when you retire at 65. "What the Government is trying to sell is a plan for people to pay in for 35 years, get £144 a week and have to wait at least until 68 before they collect it. No-one should be taken in by what is little more than a con trick."But ministers said it would provide certainty to people about what they will get from the state and provide a better platform for them to save for their retirement.Secretary of State for Work and Pensions Iain Duncan Smith said: "This reform is good news for women, who for too long have been effectively punished by the current system. "The single tier will mean that more women can get a full state pension in their own right."Pensions minister Steve Webb said: "The current state pension system is too complicated and leaves millions of people needing means-tested top-ups. We can do better. Our single-tier pension will provide a solid foundation for new pensioners."Brian Strutton, national officer of the GMB union, said a new flat-rate pension should be fairer than the present arrangements, but warned of a "very serious consequence" of the Coalition's plans. He said: "That is the increase in National Insurance contributions that employers and employees in defined benefit pension schemes will have to pay."Just as the Treasury legislation to reform public-sector pensions is going through parliament, the DWP is proposing to blow it all out of the water by rewriting the state and occupational pension landscape."Shadow pensions minister Gregg McClymont said the Coalition had originally suggested the reforms would be introduced in 2016. He added: "The Government should come clean immediately and set out exactly who the losers are."

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Pension reform warning

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