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Pensions experts condemn Darling’s PBR

The planned basic state pension increase of 2.5% announced in the Chancellors Pre Budget Report will not apply to all pensions, it has been revealed. There is also growing concern among pension organisations over the increasingly complex system of revised pension schemes.

The Chancellor had announced that the basic state pension would rise by 2.5% in his 9 December speech. However, the new rule will not apply to some pensions such as SERPs (State Earnings Related Pensions).

The Government defended its decision. Pensions minister Angela Eagle said that SERPs was not included in the increase to prevent ‘confusion and unfairness because it affects company pensions payments’.

However, other parts of the state pension are also expected to be affected and these do not affect company payments at all. This includes the graduated pension which is received by more than 10 million people.

Despite not wanting to cause confusion, it is exactly this which has caused growing concern among industry groups. Head of pensions at KPMG, Mike Smedley said the already complex system of administering pension schemes will become even more complicated with the latest announcement: ‘It is now difficult to imagine a more complicated pensions tax system. The public service pension announcement was also very confusing.

‘The fact that the Chancellor referred to "contributions" to public service pensions is also confusing, given that the majority of the schemes mentioned are unfunded. It's not clear whether this represents real and substantive change.’

The pensioner’s organisation the National Pensioners Convention said that, against the proposed increase, millions of older people will end up losing money. For example the £60 additional Christmas bonus paid in 2008 has been removed this year from all pensioners.

The Liberal Democrat work and pensions spokesman, Steve Webb said: ‘Britain's pensioners will lose money because the Government is shaving off corners where it hopes people won't notice. It's all about getting the maximum good publicity for the minimum spend.’

16/12/09