By Max Clarke
Plans put forward by Work and Pensions Secretary Iain Duncan Smith call for a universal state pension where everyone would receive a flat-rate of £140 a week. The 'single tier' retirement payment would, for example, mean working mothers would not be penalised for taking time out from work to care for children and individuals who had amassed savings would not be given a smaller pension.
James Abbott, partner at Watkin Baker LLP and UK200Group member commented:
“If tax simplification is the way forward, this kind of change is almost inevitable. The system is complex and I am aware of individuals being caught out by quirks in the system. For example, where a carer did a small amount of paid work outside of her caring responsibilities, she was then put into a worse position when it came to retirement than if she hadn’t worked at all and that’s plain wrong.
“Currently an individual’s National Insurance record is the basis for the State Pension and Benefit rights, so a universal state pension leaves the door open to potentially looking at combining tax and National Insurance into one tax. Maybe that’s where the Office of Tax Simplification is moving to as part of their Small Business Taxation Review.”
The proposals have also been subject to criticism, as Naomi Cooke, GMB's National Pensions Officer explains:
"A universal pension set at the same level as means tested benefits won't help the poorest pensioners. The government's constant attacks on decent occupational pension provision means it is increasingly hard for people to save enough to secure anything more than the basic minimum. Cuts to additional state pension and pension indexation will certainly make some retirees worse off; the question remains whether anyone will actually be better off.
We need be wary of more coalition smoke and mirrors as the Tory-Liberal government move their ideological agenda to the state pension. It's usual for the coalition's policies to unravel after they are announced; this one seems to be falling apart even before it has been launched."