IDS to announce £140 flat-rate pension plans
Iain Duncan Smith will announce today in a speech to Age UK details of a wide-ranging overhaul of the pension system.
The Works and Pensions Secretary will introduce measures to encourage young people to start saving for their retirement and give a signal that it “pays to save”. He will say: “We have to fundamentally simplify the system and we have to make it crystal clear to young savers that it pays to save."
In his speech he will also announce that a flat-rate state pension of £140 a week will be introduced to change the perception that the pension system is too complex. In his speech he will say: "The state pension system is so complex that most people have no idea what it will mean for them now and in their retirement.”
The reforms will help women who have to take time off from work to look after children and therefore miss out on years of National Insurance payments. This means that only 70 per cent of women build up the full entitlement of National Insurance contributions as opposed to 90 per cent of men. Under the new system both sexes will receive the same payment.
The pension overhaul will look at ways of encouraging people to save by removing some of the rules that discourage lower paid workers such as means testing. The government has also announced that it will introduce auto-enrolment as a requirement for employers when administering private pension schemes which will aid individuals to make their own pension provision.
Mr Duncan Smith will say that his department has done more to improve and simplify both state and private pension provision in the ten months it has been in power than Labour did in ten years and he will argue that the pension system needs the same kind of clarification that is being given to the benefit system through the introduction of the universal credit.
He will also say in his speech to Age UK that: "We have to send out a clear message across both the welfare and pension systems: you will be better off in work than on benefits, and you will be better off in retirement if you save."
But shadow pensions minister Rachel Reeves said: "These are plans for new pensioners in the future. Vague promises of jam tomorrow don't do anything for pensioners today. With higher VAT and fuel prices rising, they want help now.”
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