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Corkers
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U-turns

Pensions reform

  • Budget 2012: flat-rate state pension confirmed – The Guardian, 21 Mar 2012
  • Cameron puts brakes on pension reform – Financial Times, 17 Sep 2012

In the 2012 Budget, George Osborne confirmed proposals to introduce an initial flat-rate pension of £140 per week for those with a 30-year national insurance record, starting in 2016.

The Guardian reported:

The government says the long-awaited change, which will see the current basic state pension and second state pension (S2P, formerly known as Serps) replaced by a single scheme, will cost no more than the existing state pension system.

This means that while those on low incomes who have made small or no contributions to S2P will benefit from a higher pension than they could currently expect, people who earn higher salaries will lose out. The current full basic state pension is £102.15 a week (rising to £107.45 from April 2012), but those at the top end of the salary scale can expect up to £180 a week in combined pension payments.

However, David Cameron has now u-turned on this pensions reform policy, as the FT reports:

David Cameron has demanded a rethink of flagship state pension reforms amid fears they could alienate core Conservative supporters, including the electorally crucial “grey” vote.

The Financial Times has learnt the prime minister personally put the brakes on the plan for a flat-rate benefit worth around £140 a week after realising that millions of people would either lose out – or fail to benefit from – the new system.

The policy, confirmed in George Osborne’s controversial March Budget, is the latest to be re-examined after ministers underestimated its potential political fallout. Ministers, already smarting from the row over the “granny tax”, recoiled at the prospect of another backlash from pensioners.

Potential losers include higher earners. They will no longer be able to boost their retirement incomes through the state second pension, which will cease to exist, although amounts already built up will be protected. Existing pensioners will also lose because the flat-rate pension will only be offered to those who retire after its introduction, expected in the next parliament.

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