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2013 White Paper on Pension Reform

Volume 565: debated on Monday 1 July 2013

The Petition of residents of Lancing, West Sussex,

Declares that the Petitioners are appalled by the Governments proposals for pensions in the “New White Paper on Pension Reform”—The single tier pension: a simple foundation for saving; further that the Petitioners believe it is unfair to give a pension of £144.00 to a pensioner who retires in 2017 with 35 years National Insurance Credit when pensioners today will have to remain on their current lower pension rate, many of whom will have accumulated Working National Insurance Credits of over 40 years or more; further that anyone who has drawn their state pension before 2017 will not be included in these plans and that will be a disadvantage to millions of older women who currently get less than £144.00 a week.

The Petitioners therefore request that the House of Commons urge the Government to discuss the matter of pensions for at least another 12 months and address any equality and discriminatory issues in the Pensions White Paper.

And the Petitioners remain, etc.—[Presented by Tim Loughton, Official Report, 3 June 2013; Vol. 563, c. 1350 .]


Observations from the Secretary of State for Work and Pensions:

Supporting existing pensioners has been a priority for the Government since they came to office—with the triple lock introduced to ensure that the basic State Pension rises by at least 2.5% each year and a pledge to protect pensioner benefits such as Winter Fuel Payments for the duration of this Parliament. The Government estimate that under the triple lock uprating policy, the average person reaching State Pension age in 2013 could expect to receive an additional £12,000 in basic State Pension over retirement, compared to previous policies of uprating by prices. In addition from April 2013, the basic State Pension represents a higher share of average earnings than at any time since 1992.

Indeed, pensioner incomes have risen faster than average earnings over recent decades. Between 1998-99 and 2010-11 the mean net pensioner income for pensioner households rose by 33% (before housing costs).

However, the Government estimate that there are almost 11 million people of working age in the UK who face inadequate retirement incomes compared to the level they are likely to expect based on earnings during their working life. The Government believe that the single-tier reform proposals are necessary to ensure that current generations of workers have a decent foundation on which to save for their retirement.

Single tier will cost no more overall than the current system. It is a restructuring of expenditure to deliver a simpler State Pension system to encourage today’s workers to save for their retirement. We could not apply the single tier to current pensioners in a cost neutral and equitable way without changing pensions already in payment.

A simple comparison of the illustrative level of the new single-tier pension (£144) with the current level of the basic State Pension (£110) fails to take account of the complexity of the current pension system. Today’s pensioners receive a complex aggregation of basic State Pension, additional State Pension (Graduated Retirement Benefit, SERPS and S2P), adds-on such as the Age Addition and means-tested benefits. The additional State Pension can be anywhere between zero and over £100 per week on top of the basic pension. Whereas, the new State Pension will be capped at the full single-tier amount; for illustrative purposes £144 (in 2012-13 earnings terms) was used as the full level in the White Paper.

Moreover, it is not the case that all people in the early years of single tier will get the full amount. Only around 40% of people reaching State Pension age in the first two years after reform are expected to get the full single-tier amount directly from the state. Most people have been contracted-out at some point, during which they paid lower National Insurance contributions. Their employer will have received a rebate to fund their workplace pension. A deduction will be applied to their single-tier amount that is broadly equivalent to the workplace pension that was funded.

The Government believe that these reforms are necessary to simplify the state pension to provide a solid foundation for saving for those currently of working age and to support the roll out of automatic enrolment. The Government have introduced a Bill to Parliament to make the changes set out in the White Paper to reform the state pension for future generations. The proposals will receive a thorough examination as they pass their way through Parliament.