Sections

UK minister urges widespread reform of state pension

Related images

  • UK minister urges widespread reform of state pension

UK - The UK government has said auto-enrolment could not alone solve the pension savings shortfall facing the country, as it called for a debate on the shape of state pensions in the 21st century.

Speaking at an event organised by lobbying group Age UK, Work and Pensions minister Iain Duncan Smith said the piecemeal approach to change in the state system had resulted in a "complex mess" and called for a debate on the next generation of pension reforms.

Duncan Smith said chancellor George Osborne was "keen" to simplify it and indicated  these would involve the abolition of means-testing.

"Too many people on low incomes who do the right thing in saving for their retirement find those savings clawed back through means-testing.

"When they reach pension age, they discover that while they have foregone spending opportunities and made plans to be self-sufficient, others, who haven't saved a penny, are able to get exactly the same income as them by claiming pension credit."

It was widely expected the minster would announce a merger of all state pension-related benefits into one lump-sum payments.

The National Association of Penison Fund's chief executive Joanne Segars nonetheless welcomed the rallying cry as a turning point for pensions in the UK.

"Radical state pension reform to create a single, simple and more generous state pension could take millions of pensioners out of poverty and provide a firm foundation for saving for old age," she said. "For the first time in a generation, people would know that it pays to save."

She added that this was a golden opportunity for the coalition government, which will later this week publish an independent report by Lord Hutton on reforms to the public sector pension system, to meet its commitment of reinvigorating occupational pensions.

Marc Hommel, pensions partner at PwC, also saw the announced reforms as a positive step, saying it allowed for greater clarity and predictability of retirement income.

"People will no longer be penalised for career breaks and part-time working, which are likely to become more prevalent as retirement ages increase," he said. "Most people will now receive a bigger pension, although this will need to be funded by future tax payers."

Hommel said the reforms would allow employers to know exactly where the guaranteed minimum payment from the state pension would lie and plan their additional retirement provision around the level.

He added: "As ever, the detail of implementation will be important, and we would urge the government to consider the impact on areas such as contracting-out decisions and interaction with the changes to state pension age."

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2444

    Asset class: Trade Finance.
    Asset region: Global.
    Size: USD 10m.
    Closing date: 2018-06-25.

Begin Your Search Here