Tomorrow's Pensioners

Gale's View 23/01/2013

January 23rd 2013

It is a smidgen over seventy years since the Beveridge Report introduced the concept of a single, simple state pension based upon a lifetime of work and national insurance contributions.

Since that time the goalposts have been moved so frequently that we have ended up with a system of two state pensions, uprated according to different rules and topped up with a variety of add-on benefits and very complex arrangements for people who are widowed or divorced. There are additional provisions for married woman that date back to the days when it was considered that a man needed a job and a woman needed to have a husband and to stay at home to raise a family.

There are literally millions of retired people who do not receive, from two combined state pensions, enough to live on and that money has to be topped up with another benefit, “pension credit”. Those with small savings find themselves, as a result, little or no better off than those with no savings at all which is scarcely an incentive to encourage an ageing population to try to make provision for their retirement.

That is now, with the proposed introduction of a single flat-rate pension of £144 per week at today`s rates, all going to be simplified through a “Back to Beveridge” policy. Every individual will qualify for a pension in their own right without complex rules based upon national insurance contributions of a spouse and following the implementation of the plan in 2017 this will benefit scores of women who, because they have spent years bringing up a family, would have found their pension rights diminished. There is also provision to exclude from pension rights those who, at some point in their lives, may have done a couple of years work in the UK and have then been able to draw a state pension , at British taxpayers` expense, for many years.

Existing pensioners who will not be covered by the new scheme are already a priority. Within 6 months of coming to power the coalition government introduced a “triple lock” to ensure that the basic state pension rises, whatever the rate of inflation, by at least 2.5% a year. On average that means payment over retirement of about £15.000 more than would have been received under the old prices link. I am not, personally, in favour of the payment of fixed benefits such as Winter Fuel Payments and “free” television licences to those who patently do not need them but the government has indicated that these benefits will be protected for the lifetime of this parliament. Looking to the future, and to how we make provision for a population that, even with longer working years, will spend much longer in retirement, a full flat-rate pension based upon 35 years of contributions will modernise the State pension system to reflect the lifestyles and conditions of today`s working age people.

The government has given a guarantee that there will be no cash losers from the proposed changes and all contributions made into the current system will be protected. Yes, the “State Second Pension” will be abolished but with automatic enrolment into private pension schemes there will be no justification for government to run another earnings-related pension scheme. There will be apprehensions, misapprehensions and misrepresentations about the changes and we stand ready to respond to questions as the detail of all of this unfolds. What is certain, though, is that at long last government is making a real effort to simplify and modernise and to deliver an affordable scheme that will meet the needs of tomorrow`s pensioners.