Budget – State Pension reformThursday, March 24th, 2011
The Government’s view is that the state pension system is too complex, making it difficult for working-age individuals to determine what they might receive from the state, in particular from the State Second Pension. The Budget announcement is that the DWP is to publish a Green Paper to consult on options for reform, which will include a proposal for a single-tier pension, currently estimated to be worth around £140 a week. Moving to single-tier provision would end contracting out for defined benefit pension schemes. Contracting out for defined contribution pension schemes will end in April 2012 but the existing legislation does not anticipate the introduction of a flat-rate second pension and the end of contracting-out completely until at least 2030.
The Government has already put in place increases in the State Pension age to 65 for both men and women by 2018 and a further increase to 66 by 2020. The Government has now announced that it is also planning to bring forward proposals to manage future changes in the State Pension Age more automatically, including the option of a regular independent review of longevity changes.