Introducing the single state pension a year earlier than planned will net the government an extra £5.5bn in National Insurance revenue and benefit 400,000 women who were hit by an increase in the pension age last year, pensions minister Steve Webb said today.
In a written ministerial statement, he confirmed the plans announced on by Chancellor George Osborne on Sunday to introduce the reforms to the state pension by April 1 2016, and not April 1 2017 as was previously envisaged.
The new timetable brings the reform project back in line with the original plan for introducing the change, which had been pushed back 12 months due to the complexity of the existing system, Webb explained.
'However, given the positive response to our white paper, we looked again to see if it would be possible to return to our original timetable and to deliver reform as soon as possible, to support the roll-out of automatic enrolment into workplace pensions and provide certainty for both individuals and their pension schemes at the earliest opportunity,' he added.
Webb said the new system would 'create a simple, decent state pension, which is set above the basic means test sooner. The new state pension will be fairer to the low-paid, the self-employed and carers and make it easier for people to understand what they will get from the state when they reach state pension age.
'By introducing single tier in 2016, every woman affected by the changes we have made to the state pension age in this parliament will also now have access to the new state pension.'
The government estimates around 400,000 more people will now reach the state pension age under the single tier arrangements as the government moves forward with gradually increasing the state pension age for women to 65 by 2018.
Under the state pension reforms, the practice of 'contracting out' the second state pension to employers who run workplace defined benefit pension schemes will be abolished. Contracted out workers and their employers currently make lower National Insurance contributions and ending this a year earlier than planned will raise an additional £5.5bn for the exchequer, Webb said.
About £3.3bn of this is expected to come from employer NI contributions from the public sector and is 'in effect a transfer within the public sector', he noted. A further £0.6bn will come from private sector employer NI contributions, £1.4bn from public sector employee contributions and £0.2bn in employee NI contributions from the private sector.
The detail of these fiscal impacts will be accounted for in tomorrow's budget.
In a written ministerial statement, he confirmed the plans announced on by Chancellor George Osborne on Sunday to introduce the reforms to the state pension by April 1 2016, and not April 1 2017 as was previously envisaged.
The new timetable brings the reform project back in line with the original plan for introducing the change, which had been pushed back 12 months due to the complexity of the existing system, Webb explained.
'However, given the positive response to our white paper, we looked again to see if it would be possible to return to our original timetable and to deliver reform as soon as possible, to support the roll-out of automatic enrolment into workplace pensions and provide certainty for both individuals and their pension schemes at the earliest opportunity,' he added.
Webb said the new system would 'create a simple, decent state pension, which is set above the basic means test sooner. The new state pension will be fairer to the low-paid, the self-employed and carers and make it easier for people to understand what they will get from the state when they reach state pension age.
'By introducing single tier in 2016, every woman affected by the changes we have made to the state pension age in this parliament will also now have access to the new state pension.'
The government estimates around 400,000 more people will now reach the state pension age under the single tier arrangements as the government moves forward with gradually increasing the state pension age for women to 65 by 2018.
Under the state pension reforms, the practice of 'contracting out' the second state pension to employers who run workplace defined benefit pension schemes will be abolished. Contracted out workers and their employers currently make lower National Insurance contributions and ending this a year earlier than planned will raise an additional £5.5bn for the exchequer, Webb said.
About £3.3bn of this is expected to come from employer NI contributions from the public sector and is 'in effect a transfer within the public sector', he noted. A further £0.6bn will come from private sector employer NI contributions, £1.4bn from public sector employee contributions and £0.2bn in employee NI contributions from the private sector.
The detail of these fiscal impacts will be accounted for in tomorrow's budget.