UK Pensioners Unhappy With State Pension Exclusion
18 May 2012 (PLANSPONSOREurope.com) – UK pensioners are unhappy about being excluded from a new state pension restricted to just those who reach state pension age after 2015, according to Barnett Waddingham.
While full details are yet to be disclosed ahead of a forthcoming White Paper, the UK government has confirmed that the new pension will be payable only to those who reach their state pension age on or after the
start date in 2015. Current pensioners and those who reach state pension age between now and the specified date will be covered by existing arrangements where the pension is often made up of a combination of separate components – a basic state pension, SERPS (now the state second pension), graduated retirement benefits and the means tested top-up Pension Credit.
Malcolm McLean, Barnett Waddingham Consultant, said:
“There is clearly a simmering resentment amongst many pensioners that the new state pension is not being made available to them”, says Barnett Waddingham consultant Malcolm McLean. “They believe it is unfair that in the future older pensioners will have a worse deal than younger pensioners, and that effectively there will be what some have described as a first class and second class pension service.
“I do not think the Government can afford to disregard this sentiment. After the very bad reaction to the recent “Granny Tax” they must be aware that, in presentational terms at least, they must be seen to be fair and equitable in their approach to pensioners as a whole, but especially the more elderly ones.
“The concept of a unified pension is a long overdue change. The present state pension arrangements are convoluted and complex. A single pension will be better understood and easier to administer. Pitched at the level proposed (£140 a week at today’s prices) it will help to reduce reliance on and avoid overlaps with means tested benefits thus providing a platform for private pension saving – something which could be critically important over the coming months and years as the workplace pension auto-enrolment programme builds up a head of steam.
“But these are the very features that existing pensioners value as well, particularly the ability to give up a Pension Credit top-up in return for a higher contributory pension they will feel they have paid for and are entitled to as a right. If the Government considers that bringing in a single tier pension for everyone would be prohibitively expensive they should say so and produce the figures to demonstrate that position. In doing so it will be necessary to take account, amongst other things, of the savings that would result from off-setting reductions in pension credit costs (benefit and administrative), general administration (one system instead of two) and increased tax revenues (on increased taxable pension income).”