After weeks of waiting – not to mention a fair bit of criticism – the government has finally published its Pensions Bill.
The debate has been such that there are no real surprises: the bill makes provision for a gradual increase in the state retirement age – from 65 to 66 between 2024 and 2026; to 67 between 2034 and 2036 and 68 between 2044 and 2046.
Weekly credits to reward caring in the same way as working will be introduced, a move which means that more women in particular will retire with full benefit.
The bill also allows for the introduction of the personal accounts system, which will see automatic enrolment for employees who will pay 4 per cent of their salaries and businesses 3 per cent. Employers will receive 1 per cent in tax relief.
Personal accounts will be designed by a new delivery authority with detailed proposals to be published in a white paper in December. The bill also aims to simplify private pensions.
Work and pensions secretary John Hutton said: “The bill would give a guarantee to link the basic state pension to earnings, enshrining this commitment in primary legislation. This would mean that the state pension would be worth twice as much in 2050 than it would have been without reform.
“In order to ensure the reforms are affordable and sustainable, we plan to raise the state pension age gradually to 68 by 2046. This means that parliament will be asked to legislate for the next forty years.
“It is a big step but is absolutely the right way to meet the demographic challenge so that we do not burden our children and grandchildren with the cost of a population spending longer and longer in retirement.”
The bill has been welcomed by both the CBI and the Equal Opportunities Commission (EOC), although the CBI has warned that investment must be made in training to ensure older workers “have the requisite skills for the fast-changing modern world”.
Jenny Watson, chairman of the EOC, said: “The Pensions Bill is a landmark in public policy making: the unpaid contribution to society made by millions of parents and carers will finally be recognised and rewarded on the same terms as paid employment.
“By reforming the state pension system so that it works better for women, it will work better for everyone, meeting the needs of today’s more flexible labour market where there are no jobs for life.
“The proposals will benefit many future pensioners, particularly younger women. But we need to be sure that everyone will benefit, including women over 45.
“We want to see as many people as possible entitled to both a full basic state pension and an adequate second state pension, so that they have a firm foundation above the poverty line on which to save, without seeing those savings lost to means testing.”
