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Facing up to the future

Steve Webb MP

writes for Frome Valley Voice

As well as representing much of the Frome Valley Voice area in Parliament, since 2010 I have had an additional role as Minister of State for Pensions. I normally write in these columns about local issues that I am pursuing as an MP, but I thought it might be of interest to bring you up to date with the work I have been doing on your behalf in my ministerial role. As you will have gathered if you have opened a newspaper since the Budget, a lot has been changing in the world of pensions, and I have been in the thick of it! Many of the changes are about the future pensions of those who will retire in the future. But it was vitally important to do more for those who have already retired. That was why one of the first laws on which I signed my name was to restore the ‘earnings link’ with the state pension, broken back in 1980. In fact

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we now go one further, with the basic state pension rising each year in line with the highest of the growth in earnings, prices or a minimum of 2.5% - the socalled ‘triple lock’. In addition, I have devised a scheme that will allow those who have already retired to pay voluntary National Insurance Contributions to top up their state pension – something that isn’t currently allowed. This scheme comes in from October 2015. With regard to today’s working age population, the first priority was to simplify the state pension system. At present, few people of working age have much clue how much state pension they will get from a combination of basic pension, earnings-related pension etc., which makes retirement planning difficult. So instead from 2016 there will be a simple new state pension where people who have put 35 years into the system will get a flat rate amount on top of which they can build their own pension savings. On top of this we have introduced a system of

April, 2014

‘automatic enrolment’ into workplace pensions where firms have a legal duty to choose a pension scheme for their workers and to make a contribution into it. Workers are free to opt out but so far they are overwhelmingly choosing to stay in the scheme, and millions more are now saving for a pension as a result. Finally, the Budget introduced new freedoms so that people who build up a pot of money for their retirement can take as much of it as they want in cash – subject only to income tax – instead of being forced to lock it up for life in the form of annuity. This change has been widely welcomed and should give people new options as to how they want to handle their finances in retirement. Pensions are often not a glamorous topic and can be fiendishly complex. But I hope that this set of changes will make life better both for today’s retired population and tomorrow’s.

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