Pensions overhaul aims to encourage saving

Piggy bank

The overhaul of the pensions system should encourage people to save more, the government has claimed.

Work and Pensions Secretary Iain Duncan Smith and pensioners minister Steve Webb have announced a reform of the system with the introduction of a flat rate pension for all, thought to be £140 a week.

At present anyone over the age of 65 is entitled to a basic pension of £97.65 a week. On top of this there is the means-tested element for lower earners – known as pension credit – which can take pensions up to £132.60 a week for a single person and £202.40 for couples.

Under the new system all pensioners would receive the same rate, regardless of earnings or career breaks taken to raise children.

Webb has admitted some higher earners may lose out.

Laith Khalaf, pensions analyst at Hargreaves Lansdown, says under the current system higher earners can build up a pension of more than £140 a week through the earnings based portion of the state pension. Under the new system this would not apply.

It pays to save

But Webb says the overhaul will promote the idea that it pays to save.

Speaking before the Commons work and pensions committee he claimed anyone who joined pension schemes in addition to the state system or saved for the future would still be better-off "by a country mile".

Trevor Matthews, chief executive of Friends Provident, says this is the news the industry has been waiting for.

"Our industry has been crying out for a common sense approach to retirement planning and the universal pension proposed is a welcome step towards achieving this," he says.

"The proposal should allow savers in the UK to take responsibility for funding their own financial future by giving a clearer indication of what they can expect at the point of retirement. There are of course still kinks to be ironed out regarding how this new universal amount will be funded but on the surface this seems like a genius plan."

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Hi people,
something you should be aware of coming soon, if the Welfare Reform Bill going through Parliament is passed in it's present form.

Welfare Reform Bill Explanatory Notes:

Page 22
145. Paragraph 64 amends the State Pension Credit Act 2002 so that a member of a couple who has attained the qualifying age for state pension credit may not receive state pension credit if the other member of the couple has not attained that qualifying age. This is to ensure that all claimants who have not attained the qualifying age for state pension credit are required to claim universal credit and, if appropriate, be subject to work-related conditions of entitlement.

And in the Welfare Reform Bill itself,

Page 113
State Pension Credit Act 2002 (c. 16)

Paragraph 64 In section 4 of the State Pension Credit Act 2002 (exclusions), after subsection
(1) there is inserted—

“(1A) A claimant is not entitled to state pension credit if he is a member of a couple the other member of which has not attained the qualifying age.”

This of course will have a big impact for people on Pension Credit who are already struggling with the winter fuel bills and rising costs, so let's start contacting our MP's now to protest before it gets passed.

the budget 2011 seems to have indicated a two tier sytem will apply as existing pensioners will not be included and it may take several years to come into force why does it take so long????????

The Government have announced in the budget that fuel allowance for pensioners is to be reduced from £250 to £200 per year for over 60's and from £400 per year to £300 per year for over 80's. This miserable move when fuel costs are rising and we have had two successive bitterly cold winters. We are indeed "all in it together"

As long as bankers can receive £millions in bonuses that makes it alright then!!!!