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You can find the current article at its original source at http://www.guardian.co.uk/uk/2013/mar/20/flat-rate-pension-change-cash-grab
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| Flat rate pension change labelled a 'cash grab' | Flat rate pension change labelled a 'cash grab' |
| (8 days later) | |
| The chancellor's decision to accelerate the introduction of the flat rate state pension has been described as a "cash grab on pensions", after it emerged it will bring an extra £5bn into Treasury coffers. | The chancellor's decision to accelerate the introduction of the flat rate state pension has been described as a "cash grab on pensions", after it emerged it will bring an extra £5bn into Treasury coffers. |
| The budget statement included confirmation that the single tier pension will be introduced in 2016, a year earlier than previously planned, bringing an extra 400,000 people into the new regime. George Osborne said the early introduction of the £144 payment would "help the low paid, the self-employed and millions of women most of all". | The budget statement included confirmation that the single tier pension will be introduced in 2016, a year earlier than previously planned, bringing an extra 400,000 people into the new regime. George Osborne said the early introduction of the £144 payment would "help the low paid, the self-employed and millions of women most of all". |
| But he also acknowledged that this would mean all employees in defined benefit schemes, where payments are guaranteed, would pay higher national insurance contributions from 2016 as a result. This is because there will no longer be a second state pension which they can "contract out" of, a process which allows them to divert national insurance contributions to their employer's pension scheme. | But he also acknowledged that this would mean all employees in defined benefit schemes, where payments are guaranteed, would pay higher national insurance contributions from 2016 as a result. This is because there will no longer be a second state pension which they can "contract out" of, a process which allows them to divert national insurance contributions to their employer's pension scheme. |
| The rebate is currently worth 3.4% to employers and 1.4% to employees, money which will need to be found elsewhere if current pension pay outs are to be maintained. | The rebate is currently worth 3.4% to employers and 1.4% to employees, money which will need to be found elsewhere if current pension pay outs are to be maintained. |
| "Private sector employers can adjust their pension benefits to accommodate the extra cost; public sector employers will have to absorb the burden, as is always the case with tax changes," Osborne said. "Any spending review in the next parliament will, of course, take the £3.3bn cost into account." | "Private sector employers can adjust their pension benefits to accommodate the extra cost; public sector employers will have to absorb the burden, as is always the case with tax changes," Osborne said. "Any spending review in the next parliament will, of course, take the £3.3bn cost into account." |
| The budget report reveals that in the first year the new pension is introduced the government will save about £4.6bn it would have paid to public sector employers and employees, and £600m that would have gone to contracted out private sector workers and business. | The budget report reveals that in the first year the new pension is introduced the government will save about £4.6bn it would have paid to public sector employers and employees, and £600m that would have gone to contracted out private sector workers and business. |
| The UK's largest trade union, Unison, said the move was a "cash grab that could have serious implications for pension schemes in the public and private sectors". | The UK's largest trade union, Unison, said the move was a "cash grab that could have serious implications for pension schemes in the public and private sectors". |
| It said that although the government seemed to expect employers rather than workers to meet the costs, it had not given any guidance on how they might do so and warned that public sector schemes would need to make more cuts if they were not given more funds to meet the costs. | It said that although the government seemed to expect employers rather than workers to meet the costs, it had not given any guidance on how they might do so and warned that public sector schemes would need to make more cuts if they were not given more funds to meet the costs. |
| "Yet again the government has failed to think through the implications of its policies properly," Unison's head of pensions Glyn Jenkins said. "There is a real danger the move could fuel deeper cuts to public services and jobs, as well as be the final nail in the coffin for the few decent pension schemes surviving in the private sector. We are calling on the government to help employers and employees deal with the consequences." | "Yet again the government has failed to think through the implications of its policies properly," Unison's head of pensions Glyn Jenkins said. "There is a real danger the move could fuel deeper cuts to public services and jobs, as well as be the final nail in the coffin for the few decent pension schemes surviving in the private sector. We are calling on the government to help employers and employees deal with the consequences." |
| Other pensions experts warned that introducing the scheme with no flexibility could lead some companies to close their schemes. Joanne Segars, chief executive of the National Association of Pension Funds, which represents scheme providers, said: "If the government gets it wrong then it risks sparking a fresh round of final salary pension closures in the private sector. | Other pensions experts warned that introducing the scheme with no flexibility could lead some companies to close their schemes. Joanne Segars, chief executive of the National Association of Pension Funds, which represents scheme providers, said: "If the government gets it wrong then it risks sparking a fresh round of final salary pension closures in the private sector. |
| "Businesses that get caught on the wrong side of these changes will lose a significant rebate from the end of contracting out, and this extra cost may prompt them to close their pensions altogether." | "Businesses that get caught on the wrong side of these changes will lose a significant rebate from the end of contracting out, and this extra cost may prompt them to close their pensions altogether." |
| Tom McPhail, a pensions expert at IFA Hargreaves Lansdown, echoed those fears. "Very few employers in the private sector have managed to keep their final salary scheme going," he said. "I expect to see another wave of closures in response to the combined impact of auto-enrolment and the loss of the contracting out rebate." | Tom McPhail, a pensions expert at IFA Hargreaves Lansdown, echoed those fears. "Very few employers in the private sector have managed to keep their final salary scheme going," he said. "I expect to see another wave of closures in response to the combined impact of auto-enrolment and the loss of the contracting out rebate." |
| The move has been welcomed by groups representing about 85,000 women who stood to miss out, unlike men of the same age whose state pension age was rising at the same time as the reform was being introduced. | The move has been welcomed by groups representing about 85,000 women who stood to miss out, unlike men of the same age whose state pension age was rising at the same time as the reform was being introduced. |
| The government said 90% of employees affected by the end of contracting out and who reach state pension age before 2036 will be better off over their lifetimes. It gave the example of someone who is 40 years old in 2016 and set to retire in 2043. He or she will contribute an extra £6,000 in NI before reaching state pension age, but will gain £24,000 over the course of their retirement. | The government said 90% of employees affected by the end of contracting out and who reach state pension age before 2036 will be better off over their lifetimes. It gave the example of someone who is 40 years old in 2016 and set to retire in 2043. He or she will contribute an extra £6,000 in NI before reaching state pension age, but will gain £24,000 over the course of their retirement. |
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