It may be years before inequalities in means-tested benefits are removed, claimed Ray Chinn, head of pensions at LV=, although he welcomed the government’s move to untangle complications and break the over reliance on means-tested benefits, saying it will be a boon for pensioners.
Mr. Chinn said LV= also appreciates the Department of Work and Pensions for putting out a wide ranging consultation on state pension reforms. However, he agreed that worries still remain about rushing through the reforms though he agreed changes in the current system are required.
“The state pension needs updating. In its current form it is too complex and the wide use of means tested benefits is a disincentive for many people to independently save for retirement”, said Mr. Chinn.
“The complication of the current system results in confusion, which stops people from saving for their retirement. In addition there is an over reliance on means-tested benefits in addition to historical inequalities, which will take years to work out of the system”, he explained.
“While it would be an improvement on the current pensions system, we do not believe the option of speeding up the move to a flat-rate state second pension is the answer. Many issues we see with the current system would still remain. There would still be a great degree of complexity as a two-tier benefit system would still exist”, he argued.
A research conducted by LV= earlier this year found 25 percent of pensioners had no retirement savings or personal pensions within a year of retirement. Nearly one third of people due to retire in the next twelve months had no information about the size of their pension pots.
“It’s worrying that many people close to retiring have no idea what their income will look like, or simply have too little savings to rely on anything other than the state. A simpler state pension that doesn’t means test could help start to change this”, observed Mr. Chinn.