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Welfare Reform on the Web (June 2011): Pensions - UK

New pension rules 'risk a mis-selling scandal'

J. Kirkup and H. Watt

Daily Telegraph, May 31st 2011, p. 1 + 17

In a letter to the newspaper, David Pitt Watson of Hermes Fund Managers, has warned that Coalition government plans to automatically enrol workers in pension schemes will expose many to the danger of their money being invested in unsuitable funds that eat up much of their savings in fees. There will be no restrictions on the terms that can be offered by private providers of auto-enrolled pensions and history suggests that many employers will invest in schemes where 50% or more of potential pensions disappear in charges. There are also no restrictions on how the money can be invested, or adequate standards for records that providers keep. This leaves the system wide open to fraud.

Pension age changes unfair to women, say Lib Dems

J. Kirkup

Daily Telegraph, May 19th 2011, p. 6

The government is planning to increase the state pension age and equalise it at 66 for men and women by 2020, six years earlier than previously planned. Campaigners say that many women are therefore facing an unfairly sharp rise in their retirement age. At least 14 Liberal Democrat MPs are backing a campaign against the changes proposed in the Pensions Bill,

A state pension for the 21st century

Department for Work and Pensions

London: TSO, 2011 (Cm 8053)

This paper details the Government's investigation into options for delivering a simpler and fairer state pension which rewards those who save for their retirement and is sustainable for future generations. The consultation is on two broad options for reform of the state pension, and the most appropriate mechanism for determining future changes to state pension age. The four guiding principles for pension reform are:

  • personal responsibility
  • fairness
  • simplicity
  • affordability and sustainability
The options for reform of the state pension are:
  • faster flat rating
  • single tier
Currently the basic state pension is a flat-rate payment of 97.65 a week and the state second pension is partly flat rate and partly linked to earnings, such that higher earners receive a higher state pension. Option 1 would accelerate reforms so that the state second pension becomes fully flat rate by 2020 instead of the early 2030s. At the end of the transition those with a full contribution record - about 30 years - would receive the full pension, in two tiers, currently estimated at about 140 a week. Option 2 is a more radical approach, combining the two existing pensions into one single-tier pension. Future pensioners with at least 30 qualifying years would receive the same flat-rate pension currently estimated at 140 a week. This payment would be set above the basic level of support provided by Pension Credit. There are also two options for changing state pension age through a formula linked to life expectancy.

Public sector unions to ballot over pensions and job cuts as talks stall

P. Curtis

The Guardian, May 19th 2011, p. 14

Civil servants have voted to ballot on industrial action in protest against government's plans to cut jobs and change their pensions, paving the way for a 750,000-strong walk-out from schools, universities, courts and Whitehall in June 2011. The decision by the Public and Commercial Services Union (PCS) comes as talks set up to avoid strikes spreading across the public sector are threatening to grind to a halt, with ministers and unions failing to agree on even the basic starting point of negotiations.

Town hall staff face 9,000 pay cut to fund their pensions claim council chiefs

J. Sherman

The Times, May 31st 2011, p. 5

Local council staff face pay cuts of up to 9,000 as a result of the Chancellor's decision to raise pension contributions for six million public sector workers. Many are likely to leave the scheme if contributions rise too much especially as they are also having their pay frozen for two years.

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