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Citizens Pension
The idea of Citizens Pension was pushed along by Steve Webb of the Liberal Democrats some time ago and it looks as if the idea is also supported by think tanks. The new Work and pensions secretary Alan Johnson is definitely keeping his options open. The Conservatives are considering reform of the pension system especially affecting women.
Its all here - you chose what you read. I intend no bias except I am in favour of better pensions for ALL but especially women.
National Association of Pension Funds - introduction of a new Citizens Pension Liberal Democrat - Citizens Pension -Extra £25 a Week on the Pension under New Lib Dem Plans
Women's pensions 'a national
scandal' - Work and pensions secretary Alan Johnson
Pensions Policy Institute
is considering scrapping the second pension and introducing a
citizens pension
The Conservatives have set out plans (13 December 2004)
to end the bias against women in the state pension system.
Shadow work and pensions secretary David Willetts said a Tory government would reform the system which means women lose out if they take time off work to raise children or care for elderly relatives. In a speech being made to the Institute for Public Policy Research, he called for a more flexible approach to the pension rules to better reflect the way that people live today. He said: The pension system as it exists today is biased against women. It was designed for the days when men earned their pensions by work and women by marriage. It is much less well suited to a modern world. We need to modernise it so that it offers a fairer deal for women. We are going to make the rules for contributory pensions family-friendly for the first time. We will offer women a better deal by properly recognising the contributions they make at work and at home.? He set out four areas in which a Conservative government would seek to change the current system
Mr Willetts said that the proposals would help
end the unfairness against woman, who are currently twice as likely
as men to end up relying on means-tested benefits in retirement.
Tony Blair promised to end the stigma of means testing forever. That was all talk. Twice as many women as men are having to rely on means-tested benefits in retirement. Our policies will help reverse the spread of means tests, he said. National Association of Pension Funds (NAPF)
A leading
pensions body has called for the scrapping of the current complex
pensions regime and the introduction of a new Citizens Pension, which
would initially pay each retired person £100 and would rise in line
with earnings. However, it would not be paid until 70. The National Association of Pension Funds (NAPF) said the current system of state pension, pensioner credits and minimum guarantees was confusing, and deterring people from making sensible planning decisions.
In its
wide-ranging policy paper Pensions Plain and Simple the NAPF sets out a
number of key reforms which would boost incomes for the poorest
pensioners, strip away complexity, encourage consumers to save more,
remove barriers to workplace pension provision, and improve consumer
understanding and protection. The proposals include replacing the present tangle of State provision with a single, universal, flat rate payment worth about 22% of average earnings and rising in line with earnings. Beyond that, individuals will be encouraged to make extra provision, either through the workplace or with personal or Stakeholder pension providers. Among the key recommendations in Pensions - Plain and Simple are:
Launching
the paper, NAPF Chairman, Peter Thompson, said:Todays pension system is
weighed down by red tape, jargon and complexity. Because of this, too
many of todays workers are put off thinking about pensions, storing up
potentially massive problems for the future. The
proposals we have published today tackle this problem head-on. They
would replace the present over-complicated mix of State pension
provision with a single, flat rate Citizens Pension, payable to
everyone, set at a high enough rate to help more pensioners out of
poverty, and linked to rises in earnings rather than prices. This would
be achieved at no extra cost to the public purse. Todays workers would then know exactly where they stand. They will also know that if they wish to enjoy a more comfortable income in retirement, they must make additional arrangements, either through the workplace or with a personal pension provider. With this
one straightforward and affordable change, the whole picture becomes
simpler. Not only are the various State pensions rolled into one, but
the need for complex decisions over contracting in or out of the State
scheme is removed, along with a forest of red tape. We have also set out a series of practical and affordable steps towards encouraging employers to offer or to continue to offer - workplace pensions, and encouraging employees to make the most of them. And by
boosting the security of those in workplace pensions, particularly those
approaching retirement, these proposals will go a long way towards
restoring consumers faith in the pension system. These proposals are a well-thought out, costed and effective answer to many of the problems which threaten to push todays pension system into crisis. I hope the Government will use them in drawing up its own reform proposals to be published later this year. 7th September 2004
Liberal
Democrat - Citizens Pension
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Identity Theft in over 50s
| Pensions are currently based on National Insurance contributions. But critics say that this method discriminates against women who take career breaks to look after their children and do not pay sufficient NI contributions. "Women's pensions are, in a sense, a national scandal," Mr Johnson said. "Only 50% of women get the full basic state pension and yet we have a situation where we expect women to be carers so often." |
Mr Johnson said he was "open-minded" on the idea of the so-called "citizens' pension", but he was not against the idea that pensions should be determined to some extent by contributions |
Men need to have made 44 years of NI contributions to be entitled to a full state pension, while women have to make 39 years.
The government is facing calls to change the rules so pensions are based on the length of residency in the UK rather than on NI contributions. Mr Johnson said he was "open-minded" on the idea of the so-called "citizens' pension", but he was not against the idea that pensions should be determined to some extent by contributions.
Giving evidence to the Commons Work and Pensions Committee, Mr Johnson also said there was no end in sight for the controversial pensions credit. The benefit is aimed at topping up pensions for poorer pensioners but has been criticised for being too complicated and because it is based on means-testing.
Mr Johnson said money would have to be targeted at the poorest under any pension system. "I certainly think there is no case at the moment for looking forward to the end of the pension credit having done its job. I am certainly not going to be in a position of saying we can give notice that the pension credit is going to stop," he said.
Equal Opportunities Commission
A universal state pension paid on the basis of citizenship rather than national insurance contribution record would be a massive boost to women's retirement well being, believes Julie Mellor, Chair of the Equal Opportunities Commission (EOC).
Responding to the House of Lords Economic Affairs Select Committee's proposal for such a system, Ms Mellor said: "Giving all citizens the basic state pension would recognise the value of the unpaid caring work so many women do, and reinforce the importance of the contribution they are making to society."
The committee's report said: "Virtually all citizens make positive contributions to the economy and society through their paid and unpaid work in the period between the end of their formal education and their retirement Few people can now shirk their responsibility to contribute positively to the economic welfare of the country
There seems little reason to operate a complex
accounting system to track NI contributions and credits over each
person's working life in order for them to qualify for a full or partial
basic state pension which, in any case, will be supplemented in
retirement by means tested benefits for between half and three quarters
of all retirees."
"I hope the government will take the committee's recommendation very
seriously," concluded Ms Mellor.
Pensions Policy Institute
Women, people from ethnic minorities and disabled people are discriminated against in the present pensions system, according to a report published in September 2004.
In its study, the Pensions Policy Institute argued that current schemes make the assumption that contributors are employed throughout their working life and earn good incomes.
As a result, those with varied work patterns found themselves "under-pensioned" despite recent reforms.
The PPI is considering possible options such as scrapping the second pension and increasing the basic state pension, or introducing a citizens pension, with payments according to residency rather than the levels of contributions made.
"The structure of the UK pension system means that any group with low earnings or an irregular employment record will lose out in retirement," said report author Chris Curry.
"The system disadvantages groups such as women, ethnic minorities and disabled people, who are more likely to work part time and have low earnings. Although recent reforms aim to solve these problems, significant under-pensioning will continue."
Friday, February 04, 2005
The Pensions Reform Group makes the case against a Citizenship Pension
"Who could be against a Citizenship Pension More women than men draw an incomplete state retirement pension and the Citizenship Pension is being presented as the most effective antidote to pensioner poverty. A careful analysis of the Citizenship pension however suggests that the disadvantages of this reform far outweigh its advantages,"said Frank Field, Chair of the Pensions Reform Group at February 3rd's Politeia seminar #8364;“ A Policy for Pensions: Prosperity and Security in Retirement.
- Unfairness: The vast majority of people with incomplete insurance records, leading to a partial state retirement pension, made the decision they did not need to work, or, if they did, they would pay a much reduced N.I contribution. To award this group a full pension, when other women paid what was called the full stamp and often voluntary contributions to make up a complete insurance record, flies in the face of justice. Those who have paid a full contribution will resent that their own efforts should be discounted in this way.
- Attacks the something for something culture: A corner stone of British welfare is that people gain benefits because they have made contributions. That principle has already been severely eroded by the massive extension of means-tested benefits. Ignoring an individual's contribution for the state retirement pension could be a death blow to the insurance principle and all that that entails.
- Undermines savings: Advocates of the Citizenship Pensions suggest that the National Insurance rebate, currently used by individuals to invest in a funded pension scheme, should be largely diverted to pay for a higher state pension. If this proposal goes through it will make it nigh impossible for the Government to achieve its objective of reversing the current 40:60 ratio of pay-as-you-go to funded pension provision in this country.
- Represents a significant increase in National Insurance contributions: A significant part of each person's National Insurance contributions goes either to the State Second Pension (S2P) or, more commonly, into a company or private scheme providing a funded pension. Many voters, and particularly young voters, do not believe that the existing pay-as-you-go state retirement pension will have survived their advent into retirement. To divert the National Insurance rebate from funded provision to finance current pay-as-you-go pensions will be seen by most of today's workers as a significant increase in their National Insurance contributions from which they are unlikely to benefit from in the future.
- Underestimates the success of Pension Credit: There are severe long run disadvantages associated with Pension Credit. In particular, it builds a powerful disincentive to save. In the shorter run however Pension Credit has been successful in reaching the poorest pensioners who are largely women with incomplete insurance records. The official data probably significantly underestimates the Pension Credit's success.
Frank Field concluded:
"It is difficult to see a Citizenship Pension as an effective let alone a longer term solution to Britain's pension's crisis. Today's workers, who are called upon to finance today's pay-as-you-go state retirement pension, do not believe that this is a secure means of ensuring that they have an adequate pension when they come to retire. While Pension Credit has a superficial attraction it also diverts attention from debating the serious hard options which have to be embraced if a successful long term reforms of pensions is made in this country."
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