31 October 2006
James Purnell, the Minister for Pensions Reform, has welcomed
the broad consensus around the Government's pensions reform
proposals and announced that further radical simplification to the
state pension system is under consideration.
The Department for Work and Pensions has published its responses
to the Pensions White Paper consultation period and to the Work and
Pensions Select Committee's report on pensions reform. The responses can be viewed by clicking
here.
The Government says it believes that reforms to the state
pension system should recognise the contributions which people have
made to society through working or caring. Also, the Government
feels that there would be significant problems in introducing a
single-tier or "Citizen's Pension" which would be unaffordable, and
would undermine this "something for something" principle.
That is why the Government is considering introducing a much
simpler flat-rate State Second Pension, to replace the current
complex arrangements, when the earnings link is restored for the
Basic State Pension.
Minister for Pensions Reform James Purnell said: "Under our
reforms, everyone who has worked or cared for 30 years will be
entitled to a full Basic State Pension.
"We are now looking at radical simplification of the additional
state pension so that people would receive a weekly flat-rate
top-up for every year spent working or caring.
"That top-up might be, for example, an amount worth around £1.40
for every qualifying year. This would provide people with much
greater clarity about what they can expect in retirement.
"What people receive from the state would be, in effect, a
single pension which fully recognises their social
contribution."
The Government believes this approach gives better outcomes than
a Citizen's Pension of £114. For example, the Government says that
by the 2050s a low earner who has worked or cared for just over 40
years would be entitled to about £135 upon retirement.
