Welfare Reform on the Web (January 2005): Pensions - UK

CITIZEN'S PENSION 'COULD BE IN PLACE BY 2010'

N. Timmins

The Financial Times, Dec. 6th 2004, p.2

A citizen's pension, paying £105 a week while providing people with clear incentives to save privately for their old age, could be introduced by 2010, the National Association of Pension Funds has claimed. The pension would be the equivalent of the minimum means-tested benefit that the state currently provides, and 30 per cent higher than the current state pension. But it could be afforded, at least initially, within current planned levels of spending, as the existing system of state pensions would be ended, with no new rights accruing

CIVIL SERVANTS SET TO STRIKE OVER LOSS OF PENSION RIGHTS

J. Sherman, C. Buckley and G. Hurst

The Times, Dec. 6th 2004, p.1

Government plans to scrap the "gold standard" pension scheme for 500,000 civil servants to be announced this week could trigger the biggest national strike since 1926. The TUC is meeting to consider joint action in protest against the Government's assault on the present pension scheme. The government proposes to end Whitehall's envied final pension package and to replace it with a scheme based on career average salary.

(See also Financial Times, Dec. 7th 2004, p.2; The Independent, Dec. 9th 2004, p.18)

GOVERNMENT RISKS CLASH ON CIVIL SERVICE PENSIONS

N. Timmins

Financial Times, Dec. 9th 2004, p.3

The government risked confrontation with its 600,000 civil servants when it published proposals to switch their pensions from final salary schemes. Under the proposals, civil service pensions would be based on a "career average" - a proportion of pay earned each year - rather than a pension linked to the final salary. The move will tend to benefit the lower paid, women, late joiners, early leavers and those who take a career break. But it will come at the expense of people whose civil service career sees them gain significant promotion later in life, including mandarins. Proposals for the civil service pension are as follows:

• pensions to be based on a proportion of pay in every year of service, rather than pay shortly before retirement;
• pension age to be 65;
• contribution rates will not be fixed. Employers and members will share increases or reductions in costs, such as those arising from changes in life expectancy;
• pensionable service not limited; members can build up a service for as long as they keep working, up to 75;
• members can draw their pensions any time from 55;
• pensions will be higher if drawn after 65;
• pensions paid to partners or spouses will continue for life and for children untill 23;
• when the scheme's medical advisor agrees that members ill-health means they can no longer do their jobs, they can receive their pensions immediately;
• members in post in April 2006 will continue in the existing scheme until March 2013. They will then move to the new scheme.

PAYMENTS TO RISE IN LINE WITH PRICES

D. Charter

The Times, Dec. 7th 2004, p.26

The state pension is to rise by £2.45 a week for single people and £3.95 for couples, announced the Government. Single pensioners will receive £82.50 from April while couples will be paid £131.20 a week.

PENSION POLICY

N. Timmins

Financial Times, Dec. 20th 2004, p.1

About 500,000 people have moved back into the state pension system in a year, the latest figures from the Work and Pensions Department show. The figures are the first to show trends that the pension industry has been warning about for some time. As employers close final pension salary schemes to new entrants, the money purchase schemes that are replacing them, and which new workers join, are almost universally contracted into the state system.