David Cameron intervenes to halt state pension reform

by Hannah Brenton

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19 Sep 2012

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Conservative prime minister David Cameron

STATE PENSION REFORM is on the rocks after David Cameron raised concerns that the reform would alienate elderly voters.

The Financial Times reported the prime minister personally demanded a rethink on the introduction of a flat-rate £140-a-week state pension after realising millions of people could lose out or not benefit from the reform.

It said fears of a second "granny tax" – which led to a government U-turn on changes to the personal allowance announced in the Budget – prompted the decision.

The article said concerns rested on higher earners, who would no longer be able to boost their income with the state second pension, and existing pensioners, who would not see the flat-rate applied to people already in retirement.

Accountancy Age's sister publication Professional Pensions contacted Number 10 for a response to this report but, at the time of going to press, had not received a reply.

The comments contrast with the position of pensions minister Steve Webb, who said this month the reform had the prime minister's backing.

Webb said: "It's not straightforward, but the Queen's speech mentioned it, the prime minister says we're going ahead with it, so it's accepted."

The introduction of a flat-rate state pension has been a cornerstone of the Department for Work and Pension's agenda to simplify the country's benefits system.

It was also intended to remove concerns the introduction of auto-enrolment would penalise savers who would otherwise qualify for means-tested benefits.

The National Association of Pension Funds chief executive Joanne Segars warned the government to "stick to the plan" to introduce the flat-rate pension.

She said: "Now is not the time for the government to be putting the brakes on this landmark reform. The current system is a mess and change is long overdue."

A spokesman for the DWP said: "As announced in the Queen's speech, the government is committed to reforming the state pension system.

"A white paper will be published this year, which will outline the key features of a single-tier pension system, making the system simpler and fairer."

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