February 2013 – Pension Changes Planned
This month the government published a draft Pensions Bill introducing a single tier pension.
It claims that the reforms (planned for April 2017 at the earliest) will particularly benefit women taking time out to bring up a family, low earners and the self-employed whose national insurance contributions will for the first time count towards a full single tier pension of £144.
The Bill includes proposals for -
A framework for regular, independently-led reviews of state pension age
A simplification of the current complex system of bereavement benefits through the introduction of the bereavement support payment and
Measures to strengthen existing private pensions legislation.
However, according to the Institute for Fiscal Studies (IFS) the main effect of the government's proposed pension reforms in the long term will be to reduce pensions for the vast majority of people.
The IFS cautions that there will be a complex pattern of winners and losers in the short term and that, in the long term, the proposals imply a cut in pension entitlements for most people.
'... in the long run, the reform will not increase pension accrual for part time workers and women who take time out to care for children. In fact, in common with almost everyone else, these groups would end up with a lower pension at the state pension age under the new system than they would do under the current system.'
The IFS clarifies that the term ‘long term’ applies to anyone who will have spent 30 years or more in creditable activities (including employment, looking after children and other caring) since 2002 - i.e. those born from around 1970 onwards.
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