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IPE special report May 2018

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DWP stands by 'absolutely critical' state pension reforms

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  • DWP stands by 'absolutely critical' state pension reforms

UK - The UK government remains "committed" to the introduction of a single-tier state pension, according to the Department for Work and Pensions (DWP), despite reports that the prime minister has raised concerns ahead of the publication of the White Paper on state pension reform.

The reforms, unveiled two years ago and confirmed in the most recent Budget by chancellor George Osborne as well as May's state opening of parliament by Queen Elizabeth II, will see the end of the state second pension (S2P) and contracting-out for defined benefit (DB) funds.

Speaking with IPE, Malcolm McLean, a consultant at Barnett Waddingham, said he was not surprised by reports in the Financial Times that prime minister David Cameron was concerned about the impact of the reforms and had supposedly asked for the policy to be reconsidered ahead of the White Paper's publication in a few weeks.

McLean acknowledged there were a number of "political sensitivities" around the reform of the state pension due to the risk of higher earners seeing reduced payments, but said the change was "absolutely critical" to the incoming auto-enrolment reform.

"What the government wants to do is to provide a platform on which private saving can flourish - and that's what the new state pension will do," he said.

The consultant added that the flat-rate would ensure savers would not risk losing means-tested benefit entitlements by saving in an auto-enrolment arrangement.

"Clearly, all is not cut-and-dried," he said. "As always with pensions, what starts off as a very good, high level, macro idea sometimes falters when the devil in the detail comes out - and this may be no exception."

According to a spokeswoman at the DWP, the department remains committed to publishing the White Paper on state pension reform and expects to do so in the coming weeks, following a decision to postpone the initial spring publication.

Pensions minister Steve Webb only last month signalled his commitment to state pension changes by saying the number of available state pension payments was "simply staggering", arguing that they would "baffle even Einstein".

The DWP spokeswoman said the reforms remained on track.

"As announced in the Queen's speech, the government is committed to reforming the state pension system," she said.

"A White Paper will be published this year that will outline the key features of a single-tier pension system, making the system simpler and fairer."

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