Saga welcomes the Government's new proposals in principle, but we await the full details and we are also very concerned that we must be fair to existing pensioners as well as new ones. Saga fully understands and recognises that the current state pension system is not fit for purpose and needs radical reform. We have been calling for this for a long time. The Coalitions proposals sound as if they will make things much better for future pensioners, but we do not yet have full details and the initial comments have caused significant concerns which we have tried to clarify with the Government on behalf of our customers. We would like to point out the following which might help to reassure some people who have raised serious concerns.
We understand that the proposal is for future pensioners to be given a £140 a week flat rate state pension, which would combine existing Basic and Second State Pensions. However, it is important to note:
1. We are assured that if existing state pension entitlement would be over £140 a week, then you will still get the higher amount, so SERPS or S2P will not just be cut back to £140 (lots of people were worried about that thinking their SERPS would be reduced, but that is not the case apparently
2. As far as we can tell, only those with a full 30 year National Insurance record will qualify for the £140 a week
3. We are told that people who contracted out of the state second pension or SERPS will not receive all the £140 from the state, they will still receive their contracted out pension from their contracted out scheme and then will be topped up to £140 a week by the state. The DWP will assume that around £100 comes from the Basic State Pension and then the additional pension is added on to that. If it comes to more than £140, the pensioner will get more than £140, if it comes to less than £140, the pensioner will be topped up to £140.
This system has many advantages relative to today's system. Firstly, it means that pensioners will not have to claim pension credit and will have a more decent pension. Secondly, it means that it will be safe to save in future because very few people would end up on means tested benefits in later life. (Some may get housing benefit, but that will be only a small minority). Thirdly, this system would be easy to understand and end the mind-boggling complexity of the current system.
Saga is pleased that the Government has listened to our calls for a better and simpler state pension. We are, of course, concerned to find out the full details and also we have been assured that existing pensioners will be no worse off. We will continue to press for a better system for today's pensioners as well, although we do recognise the constraints of public spending given the huge fiscal deficit. We are very pleased that pensioner’s free benefits have been retained for the moment, but would also be happy to see the Basic State Pension increased to provide a more generous amount.
For more information please contact the Saga Press Office on 01303 771529