Andy James, advice policy manager, Towry comments on yesterday's announcement by the Government to simplify the state pension system:
"Until yesterday's announcement, the state pension system had been regarded as a complex fog of numerous systems born out of 25 years of constant legislative tinkering. The move away from this to a flat system will inject much needed simplification that will provide real incentives to save for retirement without the threat of means testing producing punitive marginal rates of taxation.
"However, whether the system is fairer hinges on the perspective of each individual and how it impacts on them. Members of some occupational schemes which have opted out of parts of the state pension arrangements, in return for lower national insurance payments, may not agree. They will suffer from the double blow of paying higher national insurance contributions, and from moves which will allow employers to change the rules of the pension scheme to limit benefits or increase contribution levels. This is particularly relevant to public sector workers who have only just gone through the pain of having their pensions restructured and contributions reassessed.
"In contrast, married and divorced women who historically have tended to get little or no second state pension benefits will find their overall levels of income rising, as will those who are self employed or on low wages.
"That said, with the overall level of state pension benefit pitched significantly below the national minimum wage, the proposed reforms are far from generous. Indeed, for some individuals, the revised level of state provision will scarcely meet the so called ‘minimum acceptable income standard' set by a public panel and widely used to determine the ‘breadline'.
"The need for individuals to take greater responsibility and make their own provisions to avoid an uncomfortable retirement will therefore become greater than ever. Perhaps the biggest real losers are those entering the work force today, who will not have had opportunity to gain any benefit from the previous more generous provisions."
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