‘Citizen’s pension’ worthy of consideration
Changing the UK’s pension system towards a flat-rate provision based on residency should be seriously considered, according to a new report from the National Association of Pension Funds (NAPF).
If introduced, a citizen’s pension would fundamentally alter the current structure of state pensions in the UK. Its proponents envisage that a flat rate amount would be paid to each individual upon retirement, based on them meeting a UK residency qualification. An individual’s National Insurance contribution history would not be viewed as relevant and there would be no means testing.
Neither would the levels of savings an individual has be taken into account – which backers believe would encourage people to save more.
Today’s report from NAPF, which was carried out by the Pension Policy Institute (PPI), suggests that such a scheme would be feasible, and could be introduced within the current state pensions’ budget.
Director of the PPI, Alison O’Connell, said: “Although the citizen’s pension is simple, the transition needs a lot of thought, because of the complexity in the current pension system.
“We know from previous research that what people want above all else is a simple pension system, and a citizen’s pension would achieve that.”
Today’s report is based around a level of £105 a week, which in turn is based on the Government’s current minimum income guarantee. The PPI argues that under the scheme no pensioner would lose out, and those currently receiving less than this level would gain – approximately eight million people.
It believes that the system would ensure that individuals receive a clear message on how much money they will receive from the state – and that it does pay to save.
Responses to the report are being welcomed until February 2005, before a further, more detailed, report is published.
