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Last Updated: Tuesday, 14 September, 2004, 03:04 GMT 04:04 UK
State pension of 105 'tomorrow'
By Jennifer Clarke
BBC Radio 4's Money Box

Pensioner protest
Pensioners are increasingly calling for change
A leading pensions research group has told the BBC that the government could put the basic state pension up to 105 a week for all pensioners without any extra cost.

That would raise the basic pension by 25, removing millions of pensioners from the need to claim means-tested benefits.

Alison O'Connell, director of the Pensions Policy Institute (PPI) believes it could be done "tomorrow" without costing the taxpayer a penny more; and without taking money back from pensioners who currently get more than that.

The flat-rate 105 a week would be paid to everyone over pension age on the basis of residence in the UK rather than the National Insurance they had paid at work.

Alison O'Connell, director of the Pensions Policy Institute (PPI)
It could be done within current government spend on pensions
Alison O'Connell, PPI
Speaking to BBC Radio 4's Money Box programme, Alison O'Connell said:

"Any reform like this is extremely complex because of the complications of the current system and it needs quite a lot of analysis to understand exactly what would happen to different groups of pensioners.

"But what we are finding as we look at it in more and more detail is that it looks more and more hopeful and feasible. It could be done within current government spend on pensions."

Automatic increase

Under her scheme, all pensioners who get less than 105 a week from the state would get an automatic increase to that level, without any means-test.

Those who already get more than that would not get any less than they get now. But less money would be diverted from National Insurance to private pensions.

To introduce a scheme tomorrow that costs nothing extra would mean there would certainly be losers
DWP spokesman
The PPI argues that such reform would: "target money on the poorest pensioners without any pensioner actually losing out and without additional pension being given to the richest pensioners.

"In that way, it is a lot fairer and a lot more cost effective than other proposals which have suggested increasing the basic state pension, which would mean the richer pensioners getting even more."

CALL FOR ACTION
More than 1,000 people gathered in Westminster in September demanding a better state pension

At the moment millions of pensioners depend on means-tested benefits to top up their income. But critics have argued the benefits are complicated to claim and expensive to administer.

In October 2003 the government introduced the new Pension Credit which has given more than 3 million pensioners an extra 1.6bn. But despite a high profile advertising campaign, around 2 million pensioners who could get the extra money have not.

Controversy

According to the PPI, Pension Credit costs 10 times more to administer than the basic state pension.

The Department for Work and Pensions (DWP) told Money Box it doubted that any change could be made without costing more or penalising some pensioners:

"To introduce a scheme tomorrow that costs nothing extra would mean there would certainly be losers.

Leading actuary and pensions expert Tom Ross
I have not come across such a strongly-held common view on any other aspect of pensions during my career
Tom Ross, pensions expert
"The option proposed for transition with the offset of existing state pension against the citizen's pension would leave many low-income pensioners worse off if Savings Credit [part of Pension Credit] were abolished."

The PPI's plans will cause huge controversy. Last week the Liberal Democrats became the first party to adopt similar proposals but said their scheme would cost 3 billion a year, despite only initially helping people aged 75 or more.

Despite these differences, Money Box has found an almost unanimous consensus that a similar reform of the state pension is essential.

Leading actuary and pensions expert Tom Ross told the programme:

"In my experience I have not come across such a strongly-held common view on any other aspect of pensions during my career, and that is quite a long time."

He and others within the pensions industry and outside are urging the new Secretary of State for Work and Pensions Alan Johnson to make the state pension his first priority.

BBC Radio 4's Money Box Investigates was broadcast on Tuesday, 14 September, 2004 at 2002 BST.

The programme will be repeated on Sunday, 19 September, 2004 at 1702 BST.



SEE ALSO:
Links and further information
14 Sep 04  |  Moneybox
The state pension
10 Sep 04  |  Moneybox


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