Last week saw the publication of the long awaited White Paper on State Pension reform. This sets out plans for a single-tier State Pension of around £144 a week for people reaching State Pension age in the future (probably from April 2017 onwards). The reforms aim to create a simpler system, reducing the need for means-testing and making planning for retirement easier. They are also intended to produce a fairer system with a better State Pension for those who have had years of low earnings and caring responsibilities.
Age UK supports these aims and we have welcomed the reforms as an important step forward for future pensioners. However we are aware that there are criticisms. In particular many older people with State Pensions of less than £144 are angry that they will not benefit.
We also know that there are concerns for future pensioners – for example some current workers will have to pay higher National Insurance and some including higher earners could receive a lower pension than they would have done under the current system. Also, although some time in the future everyone who has 35 years of contributions or credits will receive the full single-tier pension of £144, during a fairly lengthy transitional period this will not be the case. Some people will receive more because in 2017 they will have already built up a State Pension (basic and additional) of more than £144. Others will receive less than £144 because of time paying lower NI contributions when they were contracted out of the additional pension.
Age UK will be looking further at the details of the proposed changes and we will certainly be pressing hard for improvements for those already retired. We know that there is much more that needs to be done and we also know that some of the improvements we want to see are likely to be rejected on the grounds of costs. However even if the reforms will not result in an ideal State Pension system, we still believe they are important as a way of moving towards a better system.