Government Outlines Flat-Rate Pension Reforms

A new flat-rate state pension is being outlined by the government today.

The unified pension rate, likely to begin in 2017, will amount to £144 a week.

Prime Minister David Cameron says the plans are "fair", and will likely benefit women and many lower-paid workers who otherwise wouldn’t get a good state pension.

Ministers say the reform will result in a simple flat-rate pension set above the means test, which is currently £142.70.

It will be based on 35 years of National Insurance contributions. But critics say six million workers would face higher National Insurance payments as a result.

The move is predicted to affect over a million private sector staff enrolled in final salary schemes, as well as an estimated five million public sector workers.

Those in favour argue the single tier system will provide certainty to people and create a better platform for to save for retirement.

Work and Pensions Secretary Iain Duncan Smith said: "This reform is good news for women who for too long have been effectively punished by the current system.

"The single tier will mean that more women can get a full state pension in their own right, and stop this shameful situation where they are let down by the system when it comes to retirement because they have taken time out to care for their family."

But the GMB union says the proposals will "impose a £6bn new tax burden on workers and companies which is not fair to those who will have to pay more tax."

Brian Strutton, GMB National Secretary for public services, said the proposals would also result in an increase in National Insurance contributions.

"Most defined benefit scheme employers and members will find this unaffordable so will need to renegotiate their schemes," he said.

(IT)