Citizen’s pension ‘fairer to all’
A citizen’s pension giving the same amount to every Briton regardless of how long they work would be fairer and would reduce pensioner poverty, a new report says.
The National Association of Pension Funds (NAPF) believes up to ten million pensioners would be better off under the new arrangement, which would replace existing pensions and credits with a single payment.
Under the current arrangements, part-time workers, people on low incomes and women who take work breaks to have children miss out because their overall national insurance contribution is below the required level.
But a citizen’s pension would guarantee everybody £109 a week when they retire – for anything above that, people must save through a workplace or private scheme.
“Our research shows that these proposals chime closely with the pension priorities of consumers,” said NAPF chief executive Christine Farnish.
“People want a simpler, fairer system, which does not penalise women who have taken work breaks, and which does not subject millions of pensioners to means testing.”
However, shadow work and pensions secretary Malcolm Rifkind insisted the scheme would not address the root of the pensions crisis in Britain – declining pension provision and low savings.
“We continue to believe that it is important that we retain the principle that people earn the right to a state pension through contribution payments,” he said.
“One of the priorities must be to make sure women get a fair deal. I want to see a proper system of credits given to people who are not working because they care for children or sick relatives.”
A citizen’s pension is one of the proposals under consideration in the Pensions Commission, which is due to report on its findings in November.
Commission head Adair Turner has already suggested that the retirement age for state pensions may have to rise, and today’s NAPF report also mentions this as an option.
It believes that a citizen’s pension introduced in 2010 would cost no more than the current system, provided the money spent on the basic pension, state second pension and pension credit were used.
But in order to keep the citizen’s pension in line with earnings in the future, the state pension age may have to increase to 67 by 2030. To ensure it continued rising, national insurance contributions could be raised to 1.5 per cent or the pension age upped to 69.
