lunes, 14 de enero de 2013

A straightforward pension scheme for all - Telegraph.co.uk

We believe we can do much better than this. Today, as part of the Coalition's Mid-Term Review, this Government is publishing radical plans for workers to retire on a single, simple, decent pension – back to the Beveridge model, but updated to reflect modern working patterns and patterns of family life.

The basic idea is that someone starting work under the new "single tier" pension rules will build up just one state pension. It will be set above the level of the basic means test – currently £142.70 per week – and the full rate will be payable for 35 years of National Insurance contributions (NICs). As at present, there will be credits for those who cannot pay NICs because of caring responsibilities, and the new rules will particularly benefit many older women, whose time at home with children has damaged their state pension entitlements. Each individual will qualify for a pension in their own right, with no complex rules about claiming pensions based on someone else's NICs.

Because the new single-tier pension is set above the basic means test, those who put money aside when they are working in order to top up their state pension will be less likely to see any of it clawed back through the means-tested benefits system. This is especially important in a world of automatic enrolment into workplace pensions, where many lower-paid workers will be brought into pension-saving for the first time.

When the new system is introduced in 2017, people will not build up any new entitlements to the State Second Pension. However, any pension rights they have already built up will, of course, be recognised.

In single tier, there will be no second state pension, and so the complex system of "contracting out" will be abolished. Workers who were previously contracted out will pay full National Insurance contributions, as with all other workers. In return, they will build towards a pension at the single-tier level rather than the much lower basic state pension level.

For the vast majority of people, the higher NICs they pay will be more than offset by the higher state pension they receive.

The overall cost of the new system will be the same as the one it replaces. The higher flat pension is affordable because people can no longer build up very large earnings-related pensions from the Government. But higher earners will, of course, be part of the automatic enrolment scheme, which means they will have a legal right to a workplace pension with a substantial employer contribution. Those who earn most when they are working will continue to be the best off in retirement.

Over 10 million people at work today are simply not saving enough for the retirement they want. While people have to take responsibility for their own future, as a Government we will make it easier and simpler for people to plan. A combination of a single, simple, decent state pension and the right to a workplace pension will mean that, for the first time, there will be a firm foundation for retirement for today's working population.

Steve Webb is Minister for Pensions

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