Phillip Lee MP: State Pension reforms address system's faultsBy Laura Herbert
January 16, 2013
Changes are usually difficult to justify, even more so to perceive.
This is exactly how I would see the flat-rate state pension announcements.
As part of the Mid-Term Review, the Government has published a White Paper – The Single-Tier Pension: A Simple Foundation For Saving – revealing plans for introducing a single-tier state pension for future pensioners.
This will mean almost everyone who retires after 2017 will get the same state pension, worth around £145.
I strongly believe that given our debt liabilities, this is a significant and much-needed reform.
It aims at delivering a simpler and easier way to understand the State Pension System that will better support people in the Wokingham constituency to save for their retirement.
Today’s State Pension System is highly complex and gives rise to uncertainty over the value of each person’s State Pension on retirement, which makes it more difficult for people in Wokingham and Bracknell to plan and save.
The new reforms, to be implemented in April 2017, will reinforce a new system of automatic enrolment into workplace pensions by delivering a simple flat-rate State Pension for future pensions.
This system aims at modernising our State Pension to reflect the lives and contributions of today’s working age people, who are living longer and will therefore spend longer in retirement, many who will not see the high levels of private pensions that many of today’s pensioners enjoy.
This, coupled with the fact that today’s working-age people are not saving enough towards their retirement, means we are facing an under-saving challenge and if this is not acted upon the gap would increase even further.
The Government remains committed to supporting current pensioners. From April, the basic State Pension will be increased by 2.5 per cent.
It is forecasted to be almost 18 per cent of mean full-time earnings – a higher share of average earnings than at any time since 1992.
In addition those who have spent time out of the workforce, such as mothers and carers of those with disabilities, and self-employed will benefit from the new reforms, since they will now be able to qualify for full state pension.
The new State Pension System will also ensure people with less than 10 years of work or care in the UK would not qualify for the new pension, excluding some foreigners who come to the country temporarily.
The old system has proven to be complex, outdated and no longer in touch with the 2013 family.
Our families’ needs have changed and we now have no choice but to modernise and streamline a process that will provide greater clarity and confidence for saving.
I want to prolong and insure the prosperity of our country’s welfare system but to do so, the present faults in the system need to be addressed.