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Last Updated: Monday, 6 December 2004, 05:25 GMT
New pension 'would help millions'
Female OAP
Women would be better off under the new scheme, the report said
Britain's pension problems could be solved by replacing the current system with a "citizen's pension" starting at 105 a week, a report says.

The National Association of Pension Funds (NAPF) said an interim report on the scheme found it was affordable and could be implemented within six years.

It said it would benefit millions of pensioners, particularly women, and would be cheaper to administer.

It said the scheme would also be simpler for people to understand.

The beauty of the citizen's pension lies in its simplicity
Christine Farnish
NAPF chief executive
The citizen's pension study was conducted by NAPF and the Pensions Policy Institute (PPI).

Under the plan, the present system of state payments would be replaced with a universal payment starting at 105 per week and rising with earnings.

Eligibility would be based on residency, rather than work record and National Insurance contributions.

Most means testing would be removed and "contracting out" of the state pension would no longer be allowed.

Immediate benefit

The scheme would be of immediate benefit to around eight million pensioners who currently receive less than 105 a week from the state, the NAPF said.

Richard Scott, of BBC Radio Five Live's Money programme, said NAPF claimed it would particularly benefit women, who often miss out on the full basic state pension because bringing up children stops them making enough National Insurance contributions.

NAPF chief executive Christine Farnish said the citizen's pension would fix Britain's "horrendously complicated" system.

"The beauty of the citizen's pension lies in its simplicity. The state will provide 105 a week and any saving you do on top of that is yours.

"Immediately, the deal from the state is clear. Anyone wanting a better income in retirement understands the need to make additional saving, either through a workplace pension or some other means."

Long-term costs

The report found the new system could be implemented by 2010 and would cost no more than the amount currently spent by the government on pensions.

Pension protest
Pensioners rallied in August for higher payments
However the long-term costs of the scheme could require measures such as cutting government spending in other areas, raising taxes or National Insurance contributions or lifting the state pension age.

The report said such measures would be required eventually under the current system as well.

PPI director Alison O'Connell, who worked on the study, said the transition to a new system would require careful planning, but that such a change would ease public concern.

"The report shows that a citizen's pension, while not without some concerns, would be possible and could also have real advantages for state, occupational and personal pensions.

"We know from previous research that what people want above all else is a simple pension system, and a citizen's pension would achieve that."

The report also said a State Pension Review Board should be established to advise the government on pensions and a cross-party agreement on the principles of pension policy should be drafted.

The study is open to public consultation before a final report on the plan is released.

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