This email was sent to Money Box subscribers on 29 October 2010

Dear Listener

 

Listen carefully and you can hear the sound of kites being flown. Look carefully and you can see one kite labelled ‘new state pension.’

 

The Liberal Democrats came up with the Citizen’s Pension in 2004. Instead of a basic state pension paid on National Insurance contributions everyone would get about 50% more payable just because they were citizens. And to keep the cost to a manageable level the Citizen’s Pension would be paid initially to those aged 75 or more who tend to be poorer than younger pensioners. With simple qualifying conditions and set at or above the level of the means-tested pension credit the idea was that it would end the scourge of means-testing and provide a floor on which other pension provision could be built.

 

In the leaked glimpses of the new state pension kite that idea seemed to be having a Hallowe’en resurrection. The new pension scheme is being planned by Pensions Minister Steve Webb (Liberal Democrat) and his Secretary of State Iain Duncan Smith (Conservative). So it is bound to be a fusion (not to say coalition) of ideas. But the plans are not £140 a week to every citizen over pension age as originally leaked. As I understand it this will not be a citizen’s pension based on residence but paid in full as now on 30 years’ National Insurance.

 

The basic state pension (say £100) will still be paid and on top of that will be a flat-rate amount to replace the current State Second Pension (the new name for SERPS). But that extra will not be paid in full to those who pay into a salary related pension scheme at work and were opted out of SERPS (or S2P). Instead the state will top up the SERPS replacement bit of their work pension to £40.

 

Anyone who reaches pension age before the new system starts will be excluded from it – so it will only apply to new pensioners. And the means-tested pension credit will remain not just for those who reach pension age before the new system starts but for those who reach pension age after but have fewer than the 30 years they need for the full monty. Hardly the radical and easier-to-administer change we woke up to on Monday morning.

 

Or at least this is what I am told unofficially. No-one will know the actual plans until they are published later in the year. And there will then be probably four years of debate in and out of Parliament before the new system begins – pencil in April 2017 for that, with a light touch and a B pencil so you can change it easily.

 

***IN MONEY BOX THIS WEEK***

 

We start with the OTHER pension announcement – auto-enrolment, which begins to be phased in from October 2012. The rules are pretty much as Labour left them but with some small ameliorations to make it more sensible and sensitive. The Minister tells us more.

 

Emails about the Helploan fraud – which we covered last week – continue to flow into our inbox. We hear from the parties involved this week.

 

A new foal from the savings stable was introduced this week with a working title of Junior ISA. It’s a replacement for Child Trust Fund. But will it be a winner?

 

Lloyds Action Group is planning to take legal action against some directors of Lloyds Bank and the Treasury on behalf of shareholders who it says were misled when they voted overwhelmingly for Lloyds to take over HBOS in 2008. But joining the legal action costs £300 or so. Is it worth it? Or more money down the drain?

 

And….no, you’ll have to wait and see if we squeeze in more before the fickle finger of fate fades us out at 1228 on Saturday. Or listen to the repeat Sunday at 9 or listen again in the bath (battery powered devices only) or on the sofa. Or log on and listen anytime on our website www.bbc.co.uk/moneybox. There you can also read web pieces, download transcripts, follow links, and send us stories or ideas you want us to look into and Have Your Say on Junior ISA’s chances of winning the savings stakes.

 

Best wishes,

 

Paul

 

PS don’t forget the programme trail on Breakfast on BBC 1 between 0845 and 0900 on Saturday.


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