The Government must do more to tackle the problem of means-tested benefits in retirement as it prepares to introduce personal accounts in 2012, urges financial benefits provider B&CE.
The comment comes in response to a statement by Pensions Minister Mike O’Brien. He confirmed the Government’s review of means-testing, due in the autumn, will fail to table policy suggestions for overcoming the issue that some people on means-tested benefits would lose pension savings with personal accounts.
B&CE believes the problem could further damage the image of pensions, specifically personal accounts. It says the Government cannot afford to wait until next political year to say how they intend to tackle the “elephant in the room of pensions”.
John Jory, deputy chief executive, B&CE, says: “We ourselves have put our money where our mouth is by sponsoring the PPI to conduct a detailed investigation of one of the potential ways to get over the means testing hurdle through a pensions income disregard. We will continue to work with the relevant bodies to try to crack this issue that we are facing every day in our efforts to encourage our audience to save for their future.
“We implore the Government to not allow this pivotal obstacle to wider take up of pensions to slip off the main agenda into the long grass of ever-longer Government review. It needs to be tackled right now with urgency if is to be stopped from pulling the rug from under the Government’s own big idea for pensions.”
The comments follow research last month by the Pensions Policy Institute (PPI), which estimates 20% of pensioner households will face high marginal deduction rates (MDRs) in 2050. The MDR represents the proportion of a small additional increase in private pension income that lower entitlements to means-tested benefits would offset.
For example, an MDR of 40% means that, for an extra £1 a week of pension income, the individual would lose 40p a week in means-tested benefits and gain just 60p overall.
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