Pensions Reform At Last!

A radical overhaul of pensions announced in the Queen's Speech will see the state pension age rising in stages to 68.

Various surveys in recent times have revealed that most people don't mind the idea of working past the current state pension age of 65. I'm afraid I'm not one of them, which is why I save as much as I can afford to bring my retirement age forward. I'd rather go travelling.

Not that the current state pension is much to write home about anyway at just £84.25 a week. That's all set to change with the announcement in the Queen's Speech of a radical overhaul of a state pension scheme that has been tinkered with endlessly since its introduction in the 1940s and is now inadequate on its own to meet the financial needs of the growing army of pensioners.

The proposed changes are to a large extent in line with the recommendations made by the now defunct Pensions Commission last year, and the key points are as follows:

The state pension age will be raised gradually in line with life expectancy rising to 66 from 2026, then to 67 from 2036 and to 68 from 2046.

Before then, all workers who do not already belong to a pension scheme will be automatically enrolled in a national savings scheme known as a Personal Account but with a right to opt out. Employee contribution rates are expected to be 4% of earnings with employers adding 3% and the government adding 1% via tax relief.

State Pensions will once more be linked to earnings rather than prices although there is no timetable for when this will be re-introduced. During 'the life of the next Parliament' is all the current Government is promising.

The number of working years required to qualify for the full state pension will drop to 30 for both men and women - a crucial change for women who frequently don't qualify for a full state pension because they take time out of the workplace to care for children and elderly or disabled relatives.

The number of requisite qualifying years has been particularly unfair for women. But the government reckons that by 2025, 90% of women reaching State Pension age will be entitled to a full basic State Pension, compared to 30% now.

The government claims it wants an 'enduring pension settlement built on a consensus', and quite right too. An important Pensions Bill such as this one requires cross-party support if successive governments are to stop constantly tinkering with our finances in retirement.

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