The big news from the past week has been the government proposals to overhaul the provision of state pensions.
The headline proposal has been the raising of the pension age from 65 to 68 from 2044, but other proposals included returning the link between the state pension and earnings (rather than inflation), cutting the number of years it takes for people to qualify for a state pension pension, and coming up with a scheme for forced contributions, which will begin in 2012.
The gradual raising of the pension age was always going to be controversial, but I think this is a necessary measure. Given the aging population, keeping the retirement age at 65 was making less and less sense, and since the change will not come in for nearly 40 years, there is plenty of time for people to get used to the idea.
I also think that the forced contributions scheme, where employee automatically pay 4% of their salary into a pension, which is topped up by the employer and the government, is another important move. Businesses may disagree with me here (the CBI reckons it will cost business £2.3billion, and amounts to nothing more than another stealth tax).
Overall, I believe that the government has made some good decisions with the state pension reforms, as these were measures that needed taking but previous governments failed to recognise. Of course, the pension landscape may well have changed further by the time all these measures are implemented, but we could not continue with the current regime with pensions in the state they are now.
Hopefully by making these changes, we will also see greater discussion of the pensions problem, as despite these valid changes, we still need to see greater understanding of the difficulties we will face in later life, especially amongst the younger generations.
I can’t quite make out how the new system will work if people who haven’t fully contributed will receive £140 a week. What will be the incentive to pay contributions? What about people who actually paid in more contributions to ensure that they got a full pension?
I AM CURRENTLY RECIEVING MORE THAN THE PROPOSED £140 A WEEK PENSION, UNDER THESE NEW PROPOSALS, DOES IT MEAN THAT I WILL BE REDUCED TO THE NEW AMOUNT??
I would advocate any initiative to make compulsary contributions but this must be backed by an unconditional assurance of a satisfactory outcome in terms of pension receipt.I made contributions into GSP and into SERPS where in both cases the results have been very disappointing!