Plans for single tier pension welcomed by the Coalition parties but criticised by Labour

Plans to simplify the state pension system with the creation of the ‘Single Tier’ pension have been announced today. The reform will create a simple flat-rate pension set above the means test (currently £142.70) and based on 35 years of National Insurance contributions. The new system will ensure for the first time that women are fully recognised for any years spent at home raising a family. 

The introduction of the Single Tier will also benefit low-earners and the self-employed. The new single tier pension will replace the last Labour government’s complex state pension system of add-ons and means-testing. Instead, the Single Tier will provide certainty to people about what they will get from the state and provide a better platform for them to save for their retirement.

Secretary of State for Work and Pensions, Iain Duncan Smith said: “This reform is good news for women who for too long have been effectively punished by the current system. The Single Tier will mean that more women can get a full state pension in their own right, and stop this shameful situation where they are let down by the system when it comes to retirement because they have taken time out to care for their family.”

The Liberal Democrats have said the Coalition Government’s state pension reform will deliver a single, simple and decent pension. The plans put forward by Pensions Minister Steve Webb MP are as follows:

• The new single tier pension, which will apply to anyone retiring after 2017, is equivalent to £144 a week. The basic state pension is currently £107.45.
• For the first time men and women will be treated equally.
• Self-employed workers will be included fully for the first time.
• You no longer lose out if you decide to bring up children or become a carer.
• Every bit of pension people have built up so far will be honoured.

This on top of the Lib Dem ‘triple lock’ for current pensioners which means that the full state pension, by April, will be £650 more than when Labour were in power. This means the basic state pension is now at its highest share of average earnings since 1992.

Liberal Democrat Pensions Minister Steve Webb said: “The current state pension system is fiendishly complex, after seventy years of tinkering by successive governments, and Gordon Brown’s strategy of means-testing has failed those pensioners it was designed to help most. We need a simple, single state pension, set above the basic means test, which enables everyone to work towards a decent income in retirement and encourages more peoples to save for their old age."

Labour however have criticised the plans saying that Research by the Labour party reveals what Ministers tried to hide in the small print of today’s pensions announcement claiming that coalition plans will see a tax grab on almost seven million hardworking people.

Gregg McClymont, Shadow Pensions Minister, said: “David Cameron must come clean about their plans for another tax grab on almost seven million of Britain’s strivers. This Government has been caught trying to sneak out another raid on the paychecks of hardworking families already feeling the pinch - this time with a 1.4 per cent hike in National Insurance. After two years of dither and delay it has taken under two hours for this plan to unravel and once again it’s people on middle incomes taking the hit. It is a measure of the contempt this government has for Britain’s strivers that they have not been honest about the real impact of their changes.”