THE STATE pension will be standardised to £144 a week payment for almost all workers, the government confirmed yesterday, claiming the move would encourage individuals to take responsibility for saving towards their own retirement – as well as saving cash that would otherwise be poured into the state’s soaring pension bill.
The self-employed and those who have spent time out of the workforce – including many mothers – will benefit the most.
But some high earners will be hit, those who have contracted out of part of the state system and their employers will have to pay more national insurance, and young people will have to lower their expectations of what the state can provide for them in old age. The reforms could also hasten the end of the few remaining final salary pension schemes in the private sector.
“We’re making sure people in their 20s will have a savings culture,” pensions minister Steve Webb said. “The current state pension system is too complicated and leaves millions of people needing means-tested top-ups.”
He admitted some high earners would be affected but said overall there will be “far more winners”.
“Our simple, single-tier pension will provide a decent, solid foundation for new pensioners in an otherwise less certain world,” Webb added
Joanne Segars of the National Association of Pension Funds welcomed the move: “For the first time in a generation, people will know that it pays to save, and that whatever they put aside won’t be eroded by means-testing when they retire.”
However the independent Institute for Fiscal Studies warned that the overall effect of the policy change would be a cut in pension entitlements for most people in the long run.