The Pensions Policy Institute (PPI) has come out with a report that backs up the Pension Commission's recent call for changes to the way the basic state pension is set up. In fact, the report does more than just support the report; it also calls for reforms to be done faster than the Commission suggested.
The main goal of the proposed changes is to make it easier for people who are eligible to get the different types of state pensions that are currently available. Means testing, which is currently used to decide who can get a pension and how much they can get, would be dropped in favour of a single pension rate for everyone. To get people to save more, tax breaks would be given to those who try to save for a personal pension.
These reforms would serve to make pension availability, and budgeting for retirement, much clearer to understand and buy into, thereby preventing nasty surprises for the individual late in life, or the government as a generation becomes dependant on a state pension. A recent survey by the Financial Services Authority (FSA) found that people between the ages of 18 and 40 don't save much for the future and that a very large number of people in the UK could end up depending on state pensions.
This same generation has made personal finance a big business. Moneynet (http://www.moneynet.co.uk) and Motley Fool (http://www.fool.co.uk) are two websites that give UK consumers a lot of information about personal finance. But even though many of these choices include savings plans and pensions, it seems that people rarely choose them. Instead, they choose credit card deals, mortgages, insurance, and personal loans.
In the PPI report, pension experts responded overwhelmingly in favour of the proposed Pension Commission reforms. It is hoped that making the state pension easier to understand will bring the issue to the attention of people in the age range identified by the FSA.
Disclaimer
All of the information in this article is just for general knowledge and shouldn't be taken as advice under the Financial Services Act of 1986. Before signing any binding contracts, you should definitely talk to the right professionals and lawyers.
