NEST: State Pensions, Hope and the Road to Utopia

Political conferences often seem like an opportunity to spell out a Utopian version of life.  This week, the pensions minister Steve Webb has spoken at a meeting at the LibDem conference. He outlined the Government's broad intention to remove means testing from the State Pension and provide a pension that would eventually be capped at £140 a week in total (£7,280pa). Some receive a larger State Pension than this now and a few nearer to retirement expect to do so. This is primarily due to the SERPS or S2P element of the State Pension - or even delaying receipt of it. Mr Webb suggested that those entitled to larger State Pensions would retain their benefits, but going forward everyone else should expect the same amount. At the moment, irrespective of your entitlement everyone ends up with a minimum of £135 a week if you have no other (or very little) resources. This is known as pensions credit and is designed to ensure that retired people are not "poor". It is a means-tested benefit.

This is a planning nightmare for the Bureaucrats - the current State Pension is linked to National Insurance contributions and therefore UK earnings as well as age and gender. The entire system needs to be very carefully unpicked to prevent a "series of unintended consequences". It is interesting to see that Mr Webb is citing projections that 1 in 6 people alive today in the UK will live to 100 and one in three females born today will live to that age. This is also the main reason for the ambitious and hopeful aspiration of the Universal Credit System that the Coalition are introducing.

Mr Webb also suggested that NEST and its auto enrolment should be unaffected by means-testing - which is something that I blogged about yesterday as a result of further news from the conference. 

The prospect of living until 100 or longer does rather complicate financial planning and your assumptions about the future need to be considered and reviewed in line with your expectations. You may have read that Bob Hope's wife Delores died on Monday at the age of 102. She had been married to her husband Bob for 69 years. Bob Hope died at the age of 100. Bob Hope once said "You know when you're getting old when the candles cost more than the cake!".