The Government today announced plans for a radical reform to the single state pension, aimed at simplifying the current system and paving the way for a universal flat-rate.
The move toward greater clarity, follows proposals first seen in the Liberal Democrat election manifesto last year, but HR consultants have warned there will be several barriers to successful implementation has been welcomed by Buck Consultants, but the HR and benefits expert warns there are several barriers to successful implementation. The complexity of the current state pension system along with its ability to penalise certain groups, has made a move to a simple, universal state pension long overdue, according to Buck Consultants.
Removing means-testing and the current reliance on National Insurance contributions will benefit women in particular and provide a greater incentive for savers ahead of the imminent introduction of auto enrolment into pension schemes for all employees.
Fraser Smart, MD of Buck Consultants, said: "The UK's current state pension system is at the same time one of the meanest and yet most complex in Europe. Very few people, including many pensions experts and, I expect even DWP officials, can accurately calculate the pension they will receive from the state. There is no question that it is in desperate need for review, however serious questions remain over the Government's ability to deliver a more beneficial and clear system. "Central to this will be developing clear and concise criteria that protects people's credit, i.e. through NI contributions and safeguards against benefits abuse. The Government will also need to agree a figure that it can realistically afford, as the floated amount of £140 represents a large increase over the current state pension. "Ultimately, I would urge it to bite the bullet and take the politically difficult decision that there will be some losers for this. The prize of successful implementation is the prospect of putting the UK's state pension system onto a secure footing for the future, and thereby building a solid base upon which private pension provision can be made."
While the potential benefits of a flat rate are clear, the following key questions are potential barriers to the introduction: · What will be the qualification criteria? · Can the country afford it? · What will happen to those people who have paid NI contributions over many years? · Will the quest to eradicate state pension losers simply lead to yet more complication?
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