Flat-rate £140 pension: is it shelved?

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Steve WebbRui Vieira/PA Wire/Press Association Images

Pensions Minister Steve Webb announced the idea of a flat-rate pension with great fanfare almost a year ago. However, as time has dragged by, with no further plans or details emerging, some industry insiders are claiming the government is getting cold feet.

So what's going on?



The proposal

The reaction to Webb's initial announcement was mixed, but there was a great deal of enthusiasm for a system that would end the need for intrusive means-testing, complex rules about top ups and demeaning credits (which are not claimed by 1.6 million eligible pensioners). It would avoid current blights to the system, and end the requirement to jump through seemingly endless hoops to receive what you are entitled to.


The delays

However, since then, some in the industry have been arguing that the delays, and all the problems the government has faced in trying to change public sector pensions, mean the Treasury is having a re-think. There are those who think it's just too expensive right now.


Trade newspaper, Money Marketing, has published comments from a couple of skeptics. Labour shadow pensions minister Gregg McClymont said: "it appears [the £140 a week pension] may have been sunk by the Treasury." Meanwhile, Tom McPhail, of Hargreaves Lansdown, said the reform "seems to have stalled and possibly it has been derailed by the Government's battle to reform public sector pensions".

There have been hints in Westminster that even if the reforms do come about, we cannot expect anything to happen before 2015.

Confirmation

However, today This is Money has reported that Webb is committed to the flat-rate pension. A spokesman told the website: "This is very important to the entire landscape of pensions reform."

More details are expected this year, and some are hoping that there will be more information available by May's Budget.

The risk

Of course, there's every chance that those who have already retired would stay on the old system, as the cost of converting them would be too high. It would see a two-tier system emerge, where an accident of birth could cost you hundreds of pounds a year in state pension payments.

But what do you think? Can the government afford this? Or will we end up with a watered-down and ineffective shadow of the original proposals? Will the government's priority now be to avoid doing a u-turn at the lowest possible cost - rather than to introduce a fair system?

Let us know in the comments.

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