LibLink… Steve Webb: A straightforward pension scheme for all

Liberal Democrat Pensions Minister Steve Webb, the man who has already delivered the “triple lock” system for ensuring a decent annual rise in the State Pension, writes in today’s Telegraph about the Coalition’s plans to simplify pension provision and ensure that the basic state pension increases from £107 to £144 from as soon as 2017.

First, he outlined the problems with the complexities of the current system:

In Britain today, we have not one but two state pensions. The first is a basic state pension based on 30 years of National Insurance contributions, with complex rules for people who are divorced or widowed. Within it, there are also special arrangements for married women dating back to a post-war model when the old-fashioned assumption was that men needed pensions where women simply needed a husband.

The second is a state earnings-related pension, previously known as Serps, but now called the State Second Pension. This scheme is fiendishly complex, with variable amounts paid out in retirement according to past earnings, but with the chance for people to opt out into a workplace pension scheme, known as “contracting out”.

To make matters worse, many people don’t actually get enough to live on from these two pensions combined, so we have an additional system of mass means-testing known as the pension credit. Thanks to a complicated and divisive system introduced by the last government, millions of pensioners require top-up amounts to get their pension up to a decent minimum. However, this means that those with small amounts of additional savings often find themselves only slightly better off than someone who never bothered to save.

He went on to say how the new system would work:

The basic idea is that someone starting work under the new “single tier” pension rules will build up just one state pension. It will be set above the level of the basic means test – currently £142.70 per week – and the full rate will be payable for 35 years of National Insurance contributions (NICs). As at present, there will be credits for those who cannot pay NICs because of caring responsibilities, and the new rules will particularly benefit many older women, whose time at home with children has damaged their state pension entitlements. Each individual will qualify for a pension in their own right, with no complex rules about claiming pensions based on someone else’s NICs.

Steve concludes:

While people have to take responsibility for their own future, as a Government we will make it easier and simpler for people to plan. A combination of a single, simple, decent state pension and the right to a workplace pension will mean that, for the first time, there will be a firm foundation for retirement for today’s working population.

You can read the whole article here.

* Caron Lindsay is Co-Editor of Liberal Democrat Voice and blogs at Caron's Musings

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4 Comments

  • Gwen Lovell 14th Jan '13 - 3:50pm

    I spoke to Steve Webb some time ago about this pension. I will be 60 on 1 March 2013 and have paid in it seems over 43 years for a second rate pension(which I would have waited an extra 3 years to receive) Steve said over the phone that I would not loose any money. Come on !!!!!!!!!!!!!!!
    There is no way that my pension when I receive it will be 160 I will be lucky if it makes £135 per week.(especially as I am retiring from work when I am sixty to look after my sick husband who has Parkinsons.

    Just a thought perhaps us 2nd tier pensioners will be able to keep the fuel allowance and bus pass?

    I voted for you last time but you have lost my vote now

  • Paul in Twickenham 14th Jan '13 - 4:16pm

    Steve Webb was interviewed on breakfast TV this morning and it was certainly a refreshing change to watch a Lib Dem minister articulate a clear, consistent and progressive policy that stresses the importance of people taking responsibility for their own financial planning.

  • @Gwen Lovell – under the proposals nobody will not lose the pension they’ve already accrued. And it’s a lot better than the current system introduced by Gordon Brown where you might as well not have saved anything for your pension because of means-testing.

  • George Morley 16th Jan '13 - 5:17am

    Well Paul in Twickenham, what about Steve Webb and the frozen pensions issue. You know, 4% of all pensioners get no annual increases ever. Why you ask ? Well ,there is no valid reason and the Minister has never justified this. It is a disgusting legacy of successive governments and when in opposition Steve Webb said in an EDM :
    “That this House notes with concern that 520,000
    British pensioners living abroad have their pensions frozen in
    value and thus not increased when the pensions in the United
    Kingdom receive annual increases; believes the practice of freezing
    these pensions is wholly unfair, discriminatory and irrational
    especially when some pensioners living overseas do have their
    pensions increased annually; believes that all pensioners living
    abroad, many of whom have made lifelong mandatory payments to their
    state pensions, are deserving of this annual increase; and urges
    the Government to bring forward proposals to end the evident
    unfairness in the current arrangements”
    Steve Webb.
    So now, in the driving seat and the perfect position to carry out his wishes, what does he do ? Nothing ! In fact he even defends the issue by having the DWP put out false information which we have made them withdraw because it was untrue and that is the requirement for a reciprocal agreement with the country that the pensioner lives in which in the main were Commonwealth countries. Now with the new pension plan, the frozen pensioners are not mentioned and he still says that all pensioners will be better off (except the frozen ones of course).
    How can I have any respect for this man if he cannot have any for me ? I paid into the NI fund for 47 yrs and now am penalised just because of where I chose to retire. It is not about the country of residence at all but the individual pensioner. Where one chooses to live in retirement is nothing to do with the DWP and we are all British citizens and liable for tax should we have sufficient income to warrant it. If there is a tax agreement with a country that is a totally different matter. To grant the uprating to a pensioner in the USA but deny the pensioner in Canada, To grant a pensioner in the Phillipines but not one in the Falkland Islands is not just stupid but discriminatory and unjust and it goes against all commitments signed with the Commonwealth and the UN and OEDC to do away with discrimination and reduce poverty but these pensioners , should they have no other income, are destined for poverty by this blatant robbery. Theft like this has no place in todays world. There is a pensioner receiving just 9 GBP per week in Australia I understand and she is not alone. Do the Lib/Dems care ? Answers on a postcard to Nick Clegg.

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