The Liberal Democrats claim the delay in linking the basic state pension to earnings and the issue of "mass means-testing" are some of the problems with the proposed Pensions Bill.
In yesterday’s Queen’s Speech it was announced a Pensions Bill would be shortly published, but although details of what it would include were omitted from the actual speech, it is believed re-linking the state pension to earnings in 2012 and the establishment of a Delivery Authority for Personal Accounts, are key areas of the Bill.
However David Laws, Liberal Democrat Shadow Secretary of State for Work and Pensions, says welfare reform has been one of the big disaster areas of the Blair era, with much promised and little delivered.
He points out "it speaks volumes” that the Prime Minister’s last Queen's Speech includes “much needed pension reform” and the replacement of the Child Support Agency, measures which he says should have been in the first programme of changes for this government.
And Laws adds: “The potential for a long delay before the state pension earnings link is restored will mean millions of today's pensioners will gain nothing. And because the state pension will remain at such a low level, there will still be mass means-testing of pensioners, undermining incentives to save."
Meanwhile, although David Cameron, leader of the Conservatives, says he is “delighted” the government is to link the basic state pension with earnings, he criticised the government’s overall policy on pensions, in particular Gordon Brown’s handling of the tax system.
In his response to the Queen’s Speech Cameron pointed out 12 years ago, as leader of the opposition, Blair described the pensions system as a "scandal", but adds since then “his government has taken from every pension fund in the country.“
Meanwhile the Conservative leader added the Queen’s Speech was “so repetitive and so hollow that people know they've heard it all before” before suggesting the Treasury has complicated the tax system and “virtually bankrupted the pension system.”
The GMB trade union also welcomed the commitment to restore the earnings link to the basic state pension, although it agrees with the Liberal Democrats over the timing of the proposal.
Paul Kenny, general secretary of the GMB, says “This government has shown the political courage to put right one of the Tories most regressive policies. But the jury is still out on the time frame and we would like to see the link restored sooner.”
Other organisations have also welcomed the restoration of the earnings link and the rise in state retirement age, with some particularly supportive over the idea of setting up a delivery authority to help with the establishment of personal accounts.
Although the Association of British Insurers (ABI) says “much more work is needed to get the fine detail right and, crucially, the government must ensure that the existing pensions market, which serves millions of customers well, is able to prosper”.
And Chris Kenny, director of Life and Pensions at the ABI, adds: “If the government is to achieve the aim of getting more people saving more for their retirement, the Bill must contain firm measures to reduce means-testing in the pensions system.”
However the National Association of Pension Funds (NAPF) says while it supports the main elements of the proposed state reforms, it warns there is still too much complexity in the state system.
Joanne Segars, chief executive of the NAPF, adds: “The expected reforms do not go far enough, there will still be too much complexity and too much means-testing. And the State Second Pension reforms are likely to increase costs for employers offering defined benefit (DB) schemes, and Ministers should take this into account.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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