Question
Will this new government initiative to pay everybody £140 per week have a detrimental effect on people whose combined old age pension exceeds that amount? I have no objection to people receiving more to improve the lifestyle of the poorest but object if it is to the detriment of others who have paid into the system for many years to receive an enhanced pension.Answer
I'm afraid the answer to your question is unknown at present. The Government has said it will publish proposals to replace the current state pension system with a flat £140 weekly payment by 2015, but until the proposals see the light of day it's anyone's guess as to what might happen.
It would seem mightily unfair to me if those who accumulated additional pension benefits under SERPS/S2P saw those benefits reduced or wiped out. So building in an additional pension for those where these benefits exceed £140 a week under the current system would seem sensible.
But it's not quite that simple, as those who 'contracted-out' of SERPS/S2P will have built up an independent pension pot that could leave them better off versus those who've remained in SERPS/S2P, if they receive the £140 weekly pension. One option would be to reduce their £140 state pension based on how long they've been contracted-out, but this will start to make the simplification plans very confusing and potentially unfair.
Also, it would seem unfair if the Government makes retrospective changes to additional state pension top-up schemes that most of us have used in good faith.
Although conventional wisdom in recent years has been to remain contracted-into the S2P, if the Government is serious about a flat state pension then contracting-out could make sense, although I'd wait until the proposals are published before making a decision.
If a flat state pension does see the light of day I envisage a lot of protest. However it's implemented there's bound to be a group a people who are left worse off and they'll probably have every right to complain very loudly.
Will this new government initiative to pay everybody £140 per week have a detrimental effect on people whose combined old age pension exceeds that amount? I have no objection to people receiving more to improve the lifestyle of the poorest but object if it is to the detriment of others who have paid into the system for many years to receive an enhanced pension.Answer
I'm afraid the answer to your question is unknown at present. The Government has said it will publish proposals to replace the current state pension system with a flat £140 weekly payment by 2015, but until the proposals see the light of day it's anyone's guess as to what might happen.
It would seem mightily unfair to me if those who accumulated additional pension benefits under SERPS/S2P saw those benefits reduced or wiped out. So building in an additional pension for those where these benefits exceed £140 a week under the current system would seem sensible.
But it's not quite that simple, as those who 'contracted-out' of SERPS/S2P will have built up an independent pension pot that could leave them better off versus those who've remained in SERPS/S2P, if they receive the £140 weekly pension. One option would be to reduce their £140 state pension based on how long they've been contracted-out, but this will start to make the simplification plans very confusing and potentially unfair.
Also, it would seem unfair if the Government makes retrospective changes to additional state pension top-up schemes that most of us have used in good faith.
Although conventional wisdom in recent years has been to remain contracted-into the S2P, if the Government is serious about a flat state pension then contracting-out could make sense, although I'd wait until the proposals are published before making a decision.
If a flat state pension does see the light of day I envisage a lot of protest. However it's implemented there's bound to be a group a people who are left worse off and they'll probably have every right to complain very loudly.
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