Renewed call for a flat-rate pension

2004

The National Association of Pension Funds (NAPF) has called on the Government to replace the current pension system with a simple, flat rate Citizen's Pension.

Britain’s current pensions system is the most complex in the developed world, it claims, and should be replaced with a flat rate pension paid to anyone who satisfied a minimum residency test.

“Over the years, the UK's pension system has become ever more complex and confusing. Most people are baffled by it,” said NAPF chief executive, Christine Farnish .

“If people don't understand the State pension system, the most complicated in the western world, how can they be expected to make meaningful plans for retirement?”

The call came as the NAPF launched a working group to examine practical ways of implementing a Citizen's Pension.

The group is comprised of representatives from a number of pension and consumer bodies, including the NAPF, National Pensioners' Convention and the National Consumer Council, as well as companies such as Legal & General and PricewaterhouseCoopers.

It will explore issues such as what the residency test would be, how much people should receive through the pension and what the time scale would be for introducing the changes.

Earlier this year the Pensions Policy Institute made a similar call for a flat-rate benefit payable regardless of how much individuals contributed during their working lives.

The current system of a Basic State Pension derived from National Insurance contributions, a State Second pension and the means-tested Pension Credit is overly-complex and confusing, it said, while the means-testing trap’ discourages people from saving for their retirement.

A state pension model based on residency rather than work history is used in New Zealand, where around five per cent of senior citizens live in poverty compared to 20 per cent in the UK.

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