Budget 2011: What do state pension changes mean?
- 23 March 2011
The move had been trailed by the Chancellor's cabinet colleague Work and Pensions secretary Iain Duncan Smith and is expected to result in a pension of around £140 a week with the pension credit, and state second pension phased out.
The Department for Work and Pensions will publish a green paper on the issue shortly according the Chancellor but then again he also said the new system's introduction could still be years away.
The Chancellor also announced plans to link the state retirement age to increases in life expectancy.
The means-testing system built up by Gordon Brown over his years as Chancellor was widely perceived as penalising thrifty savers and benefiting those who chose not to save.
The Treasury says the new system will be phased in and will honour benefits that have accrued already, though it is not clear how this will work.
Those receiving a higher pension than £140 from their SERPS and S2P contributions accumulated during their years in work will not be penalised.
The state pension reform is seen as the key to kick starting saving for retirement by many commentators. However there are still concerns that the uncertain timetable could have a knock on effect on other pension reforms.
The Government is also planning a system known as auto-enrolment, where all employers must offer a pension – and any staff not wishing to contribute must actively opt out.
Some commentators fear that if the state pension reform is delayed it may not pay for older low earning employees to contribute to the new scheme.
Ros Altmann, the director general of Saga, said today, that the Government should consider exempting older employees if the state pension reform does not go ahead soon.
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