Kennedy unveils new pension reform policy

5.15.48pm UTC (GMT +0000) Tue 22nd Nov 2005

Charles Kennedy has unveiled Liberal Democrat plans for Pensions Reform, a week before the publication of the final report of the Pensions Commission. Charles Kennedy said "Securing a fair, sustainable pensions system that tackles pensioner poverty is one of the biggest challenges of this Parliament. We have one of the lowest state pensions in the developed world, and one of the most complex systems. Women, in particular, suffer real discrimination. We need a pensions settlement which can last so people can plan for retirement."

The main proposals are:

• New Citizen's Pension of £109.45 per week (2005/06 figures) for all over-65s, paid to all those who have lived in the UK for at least 20 years rather than based on NI contributions.

• Increase the Citizen's Pension year-on-year in line with the increase in average earnings.

• Pay for it by raising state pension age to 67, but only in 25 years time and scrapping State Second Pension and cutting back means-tested benefits

• Employees have to opt out rather than opt into company pension schemes

• Reforming public sector pensions to put them on a more sustainable footing, with MPs taking the lead by reforming their own scheme.

Mr. Kennedy said "Securing a fair, sustainable pensions system that tackles pensioner poverty is one of the biggest challenges of this Parliament. We have one of the lowest state pensions in the developed world, and one of the most complex systems. Women, in particular, suffer real discrimination. I believe that there is now a broad consensus that we need a state pension that is universal - a Citizen's Pension, linked to earnings, based on residency and set at a rate which guarantees to lift all our pensioners out of poverty from the age of their retirement."

Mr. Kennedy further said "Funding this Citizen's Pension will require additional resources. Some of these can be found by scrapping the complex State Second Pension and mass means-testing which are clearly not a viable long-term solution. But we also need to face up to tough choices - on the state pension age, and on reforming public sector pensions. And if Parliament is to be taken seriously, then it must start by looking at the pensions system for MPs which is among the most generous in the public sector."

Mr. Kennedy concluded "We need a pensions settlement which can last so people can plan for retirement. That means securing a political consensus first for change, then for long-term stability. After the Turner Report is released, we should seek to agree a new "Pensions Accord". This should be a consensus not only on the details of a new settlement, but an agreement that cross-party consultation would be a part of any future attempt to change the pensions architecture."

David Laws MP, Liberal Democrat Shadow Work and Pensions Secretary, said "Our proposals will result a simpler, fairer and better state pension system and will boost private saving. We would remove the barrier to saving created by mass means-testing. Under a Citizen's Pension there will be a real incentive to save because those able to do so will know that every pound saved will make them a pound better off in retirement. The Turner Commission gives us a rare opportunity to build a consensus for long-term pensions reform. We cannot afford to lose this opportunity. Nobody knows if there is any consensus on pensions reform within the Government, but Liberal Democrats are determined to play our part in constructive dialogue, with detailed plans and a willingness to confront the tough choices needed."

Sandra Gidley, Liberal Democrat Spokesperson for Older People and Shadow Minister for Women, said "Of the two million pensioners in Britain living below the Government's own poverty line, two-thirds are women. It is vital for the millions of women and carers who will be retiring over the next 20 years that the Government establishes a Citizen's Pension. Only a Citizen's Pension where entitlement is based on long-term UK residency not National Insurance Contributions as is presently the case, will protect those who take breaks in their careers."