The pension credit will create a reward for saving. On top of the minimum income guarantee, for every pound saved pensioners receiving the credit will get a cash top up.
In addition money will be paid to those who cannot receive the minimum income guarantee because of the capital limits rules preventing the payment if a pensioner holds an occupational pension of a certain size. Instead the amount of income people receive from their savings will be taken into account.
‘Until now, people on low incomes who have some sort of second pension have always lost out. They’ve been stuck in the savings trap,’ said Darling.
‘That would be a fairer and more realistic way of deciding who receives extra help. We are giving a clear message ? that it always pays to save,’ he said.
Darling said he would be set out full details of the new system in a consultation document later this autumn with a view to introducing the necessary legislation for the next parliament.
The new rules will also permit a major reduction in the red tape and paperwork pensioners have traditionally had to fill in.
The Conservative Party dismissed the proposals as ‘spin’ designed to head off a revolt over pensions at Labour?s conference later this month.
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