Simplified £140 state pension ‘to encourage saving’

The Work and Pensions Secretary said his department’s Green Paper, to be announced in Parliament today, would encourage more people to save for their retirement.

Pensioners currently receive £97.65-a-week but this will rise to at least £140 at current prices.

Under the proposed reforms, means-tested credits, which see nearly half of all OAPs claim £132.60-a-week, will be scrapped in about five years’ time as the Government looks to simplify pensions in a similar way to the benefits system.

Mr Duncan Smith said pension credits acted as a “disincentive” to save while the Government has moved to require employers to enrol staff automatically in private schemes from next year to boost individual savings for retirement.

In order to meet European regulations, men and women would retire at the same time and the age would rise to 66 for both sexes by 2020, a move which could bring £14bn into the Treasury’s coffers.

“What we have said is that two things exist,” Mr Duncan Smith said. “The first is that it’s so complicated that nobody understands it and (they) need to get this right for an income in retirement.

“The second thing is that far too few people are saving as a result. Seven million people don’t save at all towards their pensions right now. The third element, and really where it’s quite critical, is that it acts as a disincentive to save because right now nearly half of all pensioners are on a pension credit top-up which means basically it’s a crisis so we need to change that.”

Asked about the Government’s plans for age of retirement, Mr Duncan Smith added: “The last Government already set projections to 67, 68 ... and we are revising those to look again.

“There is no question, no point in hiding the fact that retirement will have to move over a period, obviously to help people adjust.”