The first Pensions Bill which will contain the elements of state pension reform and the introduction of a delivery authority will be published next week.
Speaking at the Association of British Insurers’ Saver Summit, John Hutton, Secretary of State for Work and Pensions, announced the Bill would “fundamentally change the landscape of this nation’s pension system”.
He confirmed the Bill would contain measures for improving the State pension system, including the restoration of the earnings link to the Basic State Pension, a raising of the State retirement age, along with the modernisation of the current National Insurance (NI) contributory system, and the setting up of a 'Personal Accounts Delivery Authority'.
And Hutton also followed up an announcement made by James Purnell, Minister for Pensions Reform, at the end of October that the government was “exploring” the possibility of further simplifying the accruals-related part of the State Second Pension (S2P).
In his speech he revealed instead of the current system where the S2P is calculated based on how much someone earns in a year, the government intends to replace this with a fixed amount of money which everyone will receive, based on the amount of time they have spent working or caring for someone, and which will be introduced at the “same time as linking the Basic State Pension to earnings”.
Hutton says this will mean people will be receiving £1.40 a week on top of their Basic State Pension for each qualifying year spent either working, caring, or doing a combination of both.
He adds: “It will give people a much clearer picture of what they will receive from the state in retirement. And when added together with the Basic State Pension, this simplified entitlement could effectively provide a single State Pension for most contributors.”
But in his speech Hutton also issued a challenge to critics of the pension reform proposals, by stating “those who want to change some element of the reforms need to explain how they could do so without jeopardising those key outcomes of fairness, simplicity and affordability.”
“The reforms in next week’s Pensions Bill make up an integrated package," warns Hutton, "We cannot pick and choose from within this package to avoid the tough choices.”
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
Duo start roles on 1 October
Where true value lies
Economy to thrive despite global risks
Behaviours, animals or something else?