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Pension reform to reward savers

Work and Pensions Secretary Iain Duncan Smith has revealed that any reform of the state pension system will reward those who save for their retirement.

Mr Duncan Smith said plans for a £140 flat rate state pension would provide a "clear foundation for saving" a week after Chancellor George Osborne confirmed the Government's intention to draw up the reforms in last week's Budget.

Beginning the final day of Commons debate on the financial statement, Mr Duncan Smith said: "Seven million people are not saving enough for the retirement that they want and few will be able to rely on a guaranteed income in retirement as the numbers saving in defined benefits schemes in the private sector have halved in the last 20 years.

"In fact less than half of the entire working age population is currently saving in a pension at all."

Meanwhile, Mr Duncan Smith said plans to automatically enrol workers on company pension schemes from next year would make a "real difference" but warned that would not be enough without reform to the state system.

He said: "Too many people reach state pension age having scrimped and saved all their life and find that others who haven't saved, or made no effort to save, are able to get the same income as them through the pension credit.

"That is why we will shortly be publishing a Green Paper on state pension reform with an option for a single-tier state pension which will provide, I believe, a clear foundation for saving."

Labour former welfare reform minister Frank Field welcomed the move but asked: "How is that going to be paid for? Is it going to be paid by pooling contributions of those who already paid under the National Insurance and Serp (State earnings-related pension) scheme?

"If so, if some people are going to lose out - how many? And what sort of message does that give to people about saving?"

The Government comfortably won a series of votes on the Budget's resolutions, with majorities ranging from 77 to 321.

Copyright © Press Association 2011

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