There’s no need to adjust your screens, it is true; we’re on the way to introducing a flat rate pension for all of £140 a week. You might be thinking you’ve heard this before; well you’re not wrong, except in opposition we used to call it the ‘Citizens Pension’.
We are on the verge of delivering on another key manifesto promise after the Chancellor announced in yesterday’s budget the coalition’s intention to give pensioners £140 a week. While this morning’s headlines are heavily slanted to the reduction of the 50% tax rate, and the ‘granny tax’, nestled away inside yesterday’s budget was a pledge to deliver a flat rate pension system.
When announcing the introduction of a new single-tier pension for future pensioners, the Chancellor paid tribute to our man in the DWP, the Liberal Democrat Pensions Minister, Steve Webb MP. In fact to quote the Chancellor,
Such is the complexity of this means-tested system that only someone like our Pensions Minister can work out exactly what someone is entitled to and what they need to save.
These words were not lost on me. The coalition is trying to simplify the tax and pension system. Having different thresholds at when you begin to pay income tax complicates things. We want to have one rate at which people start to pay tax. We are rapidly raising the rate at which those under 65 pay income tax, and soon this will be equal to what pensioners who pay income tax are already entitled to. And from then on there will be one flat, generous rate for all.
I realise many pensioners may feel aggrieved at this, thanks in no small part to the media’s inclination to whip up an issue, but firstly I would like to state no pensioners will be worse off in cash terms. Secondly this will not affect half of all pensioners as only 50% of pensioners currently pay income tax. Thirdly the introduction of the ‘triple lock guarantee’ which will see pensions rise from now on by whichever is greater; inflation, average earnings, or £2.50, led to a £4.50 increase in the State Pension last year and the highest ever cash increase of £5.31 this year. And finally yesterday’s news that we are going to introduce a £140 flat rate pension.
Further details will follow later this year, but it will be a single, generous, basic state pension for those who have worked hard and saved all their lives. It will also mean an end to the complex and unfair means testing that has for too long overshadowed the state pension system. People who can only save a little bit for their retirement will no longer see it means tested away by pension credit, and every penny you put away will go towards your retirement, which will be a particularly big boost to women and self employed workers who are the biggest losers under the current system.
This is all down to the hard work of our Lib Dem Pensions Minister, Steve Webb. However there is still a long way to go before it becomes a reality, and therefore it is vital we all get behind Steve as he seeks to make yet another long cherished Lib Dem policy delivered in government.