The universal citizen’s pension

Pensions Minister Steve Webb’s plans for a universal citizen’s pension of £140 per week – first broken on Citywire last Friday and confirmed on Monday with a DWP Green Paper due before the end of the year – is an attractive-looking option but, as always, the devil is in the detail.

Nigel at ToUChstone points out that the issues of the cost of the scheme and who pays for it, and unravelling the contracting out aspects (and see also Bryn Davies’s comments on the impact on contracted out pension schemes), present immense practical difficulties while the costs are likely to be well in excess of the suggested savings from abolishing the means testing elements; meanwhile, further leaks about the proposals (that the measure will not be introduced until 2015, by which time the state pension plus means-tested Pension Credit will be well above £140; and that, even then, it will be for new pensioners only) indicate that the gritty reality is likely to fall rather short of the ambitious glory of the headlines.

None of this means that the concept of a citizen’s pension is not worth looking at, while pensions tend to be considered within a long-term time-frame, so a gentle introduction is not completely incredible (though neither did that prevent Beveridge from radical, and rapid, reform to improve state pension provision, and at a time of course when the debt situation was *even* worse). The sheer complexity of the UK’s pensions system also implies a web of difficulties whenever reforms are attempted (and, in this context, today’s announcement of the outcomes of DWP’s review of automatic enrolment appears to be worth at least two cheers).

Even so, a new system with older pensioners on one regime and new ones on another does stretch the bounds of credibility, not least within a system whose essential characteristic is a striving for greater fairness. If greater fairness is not the outcome, any reform looks surely set to fail and, at least this side of the publication of the Green Paper, I can’t see any circumstances in which this reform might, at least under the current government with its, er, obsession with cuts, succeed.

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