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Pension reforms 'benefit majority'

Published on 18 June 2013 10:30 AM

The Government says its pension reforms will leave the 'vast majority' of the population better off.

Work and Pensions Secretary Iain Duncan Smith claims the change to a single-tier state pension for those reaching pension age after 6 April 2016 is the most significant reform in a generation.


He acknowledged that many workers will have to pay higher National Insurance contributions but the 'trade-off' is 90% of people will be better off, including those paying more through National Insurance.

Mr Duncan Smith made the comments as he introduced the Pensions Bill at second reading in the House of Commons, where he said the new single-tier pension of £144 from 2016 onwards will replace the current system of add-ons and benefits that is 'complex and confusing'.

He said the pensions issue has become an increasingly 'pressing' one given the larger numbers of older people in the population.

'Reform benefits the vast majority' - Duncan Smith

The new system accounts for the changes in family life and working patterns over the years and reflects the need for people to 'take personal responsibility for planning and for saving for their retirement', he added.

Mr Duncan Smith said the new system is also beneficial in that it makes it easier for people to keep tabs on multiple pension pots - an increasing concern given the flexibility in modern careers.

He told MPs that with many employees working for several employers throughout their working life it is estimated that without the changes there would be 50 million unclaimed funds by 2050.

Commenting on the changes, Mr Duncan Smith said: 'The reality is that all, bar a small number, will be better off. I know it is never an easy pill to swallow, but the overall reform benefits the vast majority of people.'

He added: 'It's a trade-off here really in a sense. They get more, but they have to pay a bit more. Whichever way you cut it, it would be very difficult to avoid that.'

Some MPs are unhappy with the proposals

Mr Duncan Smith told MPs the current two-tier system where there was a basic state pension and additional state pension, along with add-ons, was difficult to understand and was based on a difficult process of means-testing.

But some MPs were unhappy about the proposals.

Tory MP Sir Peter Bottomley (Worthing West) said it was wrong the reforms did not address the anomaly that those living in Commonwealth countries often did not receive the same state pension up-ratings as those who retired to countries within the European Union or the United States.

He said he wanted to serve on the committee which would be set up to review the legislation with the intention of stopping the 'historic, immoral anomaly' whereby those who lived in UK dominions were sometimes left to live on £6-a-week instead of £160-a-week.

The triple lock must be enshrined in legislation - Age UK

Michelle Mitchell, Age UK Charity Director-General, commented: 'The Pensions Bill marks an important step forward in the process of simplifying the state pension system. However, while we support the overall aim of the single tier pension, we believe the legislation could be improved.

'For example we are keen to see the triple lock enshrined in legislation - for current and future pensioners - so the pension maintains its value over time. While a better system for future pensioners is vital, the government also must not overlook the needs of millions of current pensioners who are struggling to survive on a meagre state pension.'

Copyright Press Association 2013

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Last updated: Dec 05 2018

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