Pension Reform (Hansard, 5 July 1999)

§ Mr. Timms

Our strategy for a fundamental reform of the pensions system was set out in the pensions Green Paper "A New Contract for Welfare: Partnership in Pensions" published before Christmas. It is based on the principle that everyone who can save for his or her retirement has a responsibility to do so. In turn we have a responsibility to provide security in retirement for those who cannot save enough. Our proposals are based on four interlinked pillarsthe contributory Basic State Pension, increased at least in line with prices, will remain the key building block of the pension system. the Minimum Income Guarantee, delivered through Income Support, which will provide an income floor below which no pensioner without savings will fall, and we aim to uprate that guarantee in line with earnings as resources permit. The new Minimum Income Guarantee will form the target which we want people to beat through their pension provision and they will do that in different ways. a new State Second Pension to replace SERPS. State Second Pension will ensure that everybody who has worked and contributed throughout their working lives will have an income on retirement above the level of the Minimum Income Guarantee. People caring for a disabled person or bringing up children aged five and under, and disabled people with broken work records, will get credits for State Second Pension. Stakeholder Pension schemes, which will provide good value, reliable funded pensions for people for whom no suitable funded scheme is available.

We believe that for most people on moderate and higher incomes it is a funded pension that offers them the best prospects for their income in retirement and that is why we are determined to ensure that those people who today can save for their retirement have the framework in which to do so. Stakeholder Pension schemes will combine the low overheads and high security of occupational pensions with the flexibility of the best of personal pensions, and will be available to all. They will be particularly designed to help those on middle incomes, those earning roughly between £9,000 and £20,000 a year, but will benefit those on higher incomes as well. Once secure low-cost value for money Stakeholder Pension Schemes have become established, we expect the State Second Pension will no longer be earnings-related but paid at a flat rate.

Occupational pension schemes are one of the main reasons for the improvement in pensioners' incomes over the recent decades and will continue to play a vital role. We want to build on the success of traditional occupational schemes. In the "Strengthening the Occupational Pensions Framework" consultation paper that was published on the day after the pensions Green Paper we set out a number of proposals to strengthen and simplify the regulation of occupational schemes.

Our objective is to bring the UK pensions system up to date and to make sure that after a lifetime of hard work people do not arrive at retirement certain to depend on income-related benefits. We are determined to ensure that everyone has a decent income in retirement and these objectives are at the heart of the Pensions Green Paper we published in December.