The Pensions Policy Institute (PPI) publishes new research which provides an independent assessment of the potential impact of the state pension reforms set out in the Government's Green Paper: A State Pension for the 21st Century.
The research was commissioned by the National Association of Pension Funds who asked the PPI to consider the potential impact of the reforms on Government spending on pensions and on means-tested benefits, on the winners and losers of the reforms, and on the potential wider impact on private pensions.
On the implications of the Government accelerating the pace of existing state pension reforms, Niki Cleal, PPI Director said:
"If the Government were to accelerate the pace of existing state pension reforms so that the state pension is flat-rate by 2020, instead of by 2030 as in current plans, no pensioner would gain any extra pension income and 5 million pensioners could lose out by 2034."
"Accelerating the pace of current state pension reforms would save the Government money but overall pensioners would be worse-off. However, this reform may put less pressure on existing private pension schemes than the introduction of a single-tier pension. "
On the implications of the Government introducing a flat-rate single tier pension of £140 a week (in 2010 earnings terms) for pensioners who reach State Pension Age after 2016, Niki Cleal, PPI Director said:
"The introduction of a single-tier state pension as proposed by the Government of around £140 a week could be broadly cost neutral, but would lead to winners and losers. Some 7 million pensioners could see their household pension income increase under the single-tier reform by 2034, but 5 million pensioners could see their household's pension income reduce."
"A single-tier pension is likely to be beneficial for some women, carers and some low earners who tend not to qualify for a high amount of state pension in the current system. The self-employed may also benefit, although they may have to pay higher National Insurance contributions in the future."
"Those individuals who would have qualified for large amounts of state pension in the current system could lose out the most under a single-tier pension - often moderate to higher earners with an expected full career and National Insurance contribution record."
"A single-tier pension could also significantly reduce the percentage of pensioner households eligible for Pension Credit from 35% under the current system, to around 5% of pensioner households by 2055."
"The single-tier pension could place additional burdens on employers and employees in Defined Benefit schemes in both the public and private sectors as National Insurance contributions would increase. The final impact on private pension scheme members would depend on how employers reacted to the Government's state pension reforms. "
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