Universal pension dubbed ‘key piece of jigsaw’ - Pensions - News - Moneyfacts


Universal pension dubbed ‘key piece of jigsaw’

Universal pension dubbed ‘key piece of jigsaw’

Category: Pensions

Updated: 04/04/2011
First Published: 25/10/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The news that the Government is to look at how it can improve the basic state pension has been welcomed as the key piece of the jigsaw of pension reform.

Although precise details of the plans are not yet known, Business Secretary Vince Cable told the BBC that Pensions Minister Steve Webb was working on a 'radical' plan to 'make sure people can look forward in retirement to a good state pension without means testing'.

The proposals are not due to be revealed until later this year, but it is believed that the current system will be replaced by a universal state pension.

"I suspect the idea is to introduce a flat rate state pension, which combines the basic and second state pensions into one payment of, say, £140 a week," said Dr Ros Altmann, director general of the Saga Group.

"This is above the pension credit level of just over £132 a week and well above the full basic state pension of just over £97 a week.

"Everyone would automatically get this higher pension, so most women would receive a much better state pension, without having to claim pension credit and without penalty to their private savings."

Mr Cable said the changes would not be made overnight, and that the state of the public finances would have a bearing on when the plans could be phased in.

Despite the lack of firm details, the fact that the Government is looking into the situation has been welcomed by those within the pension industry.

"Today's news that the Government is due to launch a consultation on a universal basic state pension is the key piece of the jigsaw which has been missing from all the pension reforms enacted to date," said Tom McPhail, head of pensions research at Hargreaves Lansdown.

"With this reform we would finally achieve a simple, transparent and functioning pension system which would encourage everyone to save for their retirement."

Dr Altmann added that after years of watching the pension system falling apart, it seemed that the coalition Government may finally be getting to grips with the inadequacies of the UK state pension.

"If today's reports are accurate, and they do seem mightily well-informed, a pension revolution is about to occur," she added.

Find the best pension for you - Compare pensions.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Savers more worried about looks than pension

When you think of getting older, what’s the first thing that comes to mind? For many, it’ll be fears about their looks – but they should really be concerned about their financial situation.

Pension funds defy uncertainty with strong returns

Economic uncertainty has been a persistent theme in recent months, but happily, not every area has been negatively impacted. Indeed, our latest figures show that the pension sector has bucked the trend and posted unexpectedly strong returns.

Do you know what a pension is?

Pensions are something we all need to get our heads round, and we’re continually told that it’s important to start saving into one from as early as possible. Yet new research suggests that this advice could be falling on deaf ears.