By Marcus Leach
The Confederation of British Industry (CBI) have said that the launch of the government's new single tier pension plan will bring 'clarity and certainty' to retirement saving.
The Coalition government launched a White Paper, The Single-Tier Pension: A Simple Foundation for Saving, on Monday.
The reform will create a simple flat rate pension set above the means test (currently £142.70) and based on 35 years of National Insurance contributions. It will particularly benefit women, low earners and the self employed, who under existing rules find it difficult to earn a full state pension.
By replacing today’s complex system of add-ons and means-testing the Single Tier will provide certainty to people about what they will get from the state and provide a better platform for them to save for their retirement.
The business group backs moving to a single tier system. And it welcomes proposals to protect private sector employers from the increases in National Insurance Contributions from the abolition of contracting out final salary schemes from the State Second Pension.
“The current state pension is confusing and complex. Big rises in life expectancy and long-term pressure on public finances mean we must get more people saving for old age," Neil Carberry, CBI Director of Employment and Skills Policy, said.
"These reforms will give real clarity and certainty about how much retirement income people will get from the state and how much they need to save privately through auto-enrolment schemes.
"It is right that the changes will protect state pension entitlements built up before the reforms kick in. Businesses have been concerned about the financial impact of abolishing the National Insurance rebate for contracting out defined benefit schemes.
"They will be pleased that the Government has put a plan in place to deal with this. The rebate is in place to recoup the National Insurance owed to employers by the state for paying the Second State Pension on its behalf.
"The changes will only be acceptable if employers with defined benefit schemes are not left worse off.”
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