Iain Duncan Smith Declares ‘Incredibly Pro-Family’ £155 Pension Boost
A new £155-a-week flat rate state pension will be ‘incredibly pro-family’, Iain Duncan Smith declares today.
The shake-up will also end the indignity of means-testing for millions of older people, he says.Unveiling the biggest reform of the system since it was created more than a century ago, the Work and Pensions Secretary says couples and women who take time out of their career to bring up children will be the biggest winners.But in an interview with the Daily Mail he also reveals that in future, people will have to make 35 years of National Insurance contributions to qualify for the more generous retirement payments, up from 30 years now.At the moment, an individual begins to build up state pension entitlement after one year of National Insurance contributions. Under the new system, this will be increased to ten years.
The Mail first revealed in 2010 thatthe Government was considering merging the basic state pension with the state second pension and means-tested pension credit.Today, ministers will publish a White Paper which will say that the new, flat rate payment will be worth around £144 a week in today’s prices – forecast to rise with inflation to more than £155 when it is introduced by 2017. The current state pension is £107.45 a week.The reform will end the inefficiency and the indignity of pensioners whose income falls short of a guaranteed minimum having to have detailed assessments of their income and savings to see if they qualify for pension credit.As well as being a huge disincentive to save for retirement, the current system deters many pensioners from claiming pension credit, even if they are entitled to it.
In a major boost for women and families, the years spent raising a family will finally be recognised and counted in full towards the new state pension.Couples will also benefit, since they will each qualify for the full new payment, rather than the current, less generous couple’s rate. The reforms mean 750,000 women who reach pension age in the decade after the new pension is introduced will on average get an extra £9 a week.But those in final salary pension schemes – the vast majority now in the public sector – will face higher National Insurance contributions as the right to opt out of the state second pension comes to an end.
The age at which the pension will be paid will rise in future, as life expectancy increases – with today’s teenagers likely to have to wait until their 70s to claim.‘The single tier [flat rate] is incredibly pro-couples and pro-family,’ Mr Duncan Smith said.‘No longer will a woman be punished should a couple decide that she will stay at home to look after their children or take care of an ill relative. Both partners will now retire on a single tier pension, making that couple better off.‘These changes will benefit women enormously. As we know, the present system has let down too many women – it effectively said you can either raise your family or get a full pension, but you can’t do both.
‘That is ridiculous and I am pleased that it is this coalition government that has said this is out of date, unfair and needs to change. The single tier pension is the next major step in our reform to the welfare system.‘Not only are we making work pay with universal credit, but we will now ensure it pays to save.‘Under the existing system millions of savers are effectively penalised for doing the right thing thanks to the perverse way pension credit works.
‘The single tier will mean people have certainty in what they can expect from the state. Thirty-five years worth of National Insurance contributions will mean a full basic state pension, set above the existing means test. This means we can end the indignity that so many people feel when having to go through the process of telling Government what they have saved and where every pound and penny is.‘Far more people are eligible for pension credit than actually take it up and in many cases this is because people would rather not go through what they see as an intrusive means test.
‘Who can blame them? Many women, in particular, saved what they could, decided to bring up a family and care for loved ones and the state rewards them by forcing them to tell us all about their financial history so that they can claim a state pension.’ Mr Duncan Smith said Labour had talked for many years about the need to ensure the state pension was fair and a better platform for saving.‘But instead they created a complex, bureaucratic system that penalised saving and subjected people to means testing they did not want to go through,’ he said.Dr Ros Altmann, a former Government pensions adviser who now heads over-50s group Saga, said: ‘These are brave proposals. Radical reform of our complex pension system is long overdue.’ – DailyMaily
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