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Attacks on state pension reform are short sighted
by William Robins on Dec 14, 2012 at 14:44
Today’s Daily Telegraph led with an attack on incoming state pension reforms, warning a flat rate £140-a-week state pension would rob high earners of £1,000 a year in retirement.
The paper said richer pensioners will receive on average £20 a week less than under the current system. A flat rate will end the second state pension (S2P) as it exists today by rolling it into the basic state pension.
Currently S2P tops up the basic state pension and is based on national insurance contributions, a percentage of earnings, so the more you earn the more S2P you receive.
The Telegraph said a high earner receiving £107.45 can boost their state pension payment to £160 using S2P.
While that is true, it is wrong to construe pension minister Steve Webb's plans as an attack on higher rate pensions. The earnings related part of S2P is already being phased out and this started with the previous government.
True, the state pension reform green paper offers just two options and both bring removal of the earnings link forward to 2020. But entitlement already built up through S2P and the earnings link will be retained, meaning there will be many well off pensioners retiring on a 'flat rate plus' of around £160 a week.
Oddly many of those up who will be up in arms about changes to S2P will also complain that the flat rate will only apply to new retirees; those already in receipt of state pension by the time the reforms come in will be paid under the old rules.
Many high earners will not be in a position where they will lose out on that £1,000, and those in the future that will are unlikely to have failed to make private provision for their retirement. To use the this impact of the state pension reforms as an opportunity to attack government pension policy is unfair.
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by New Model Adviser team on Jul 28, 2014 at 16:05