Ministers are reported to be on the verge of a pledge to provide state pensions based on residency, rather than national insurance contributions.
The move towards a "citizen's pension" will particularly help parents, usually women, who take time out of work to care for children, who are losing out in retirement.
Party Response: Conservative
David Willetts, shadow secretary for work and pensions, said: "Many women don’t get a fair deal from state pensions and this needs to change. But replacing national insurance pensions with just another state benefit is throwing the baby out with the bathwater.
"We have already put forward practical proposals for giving women a better deal from contributory pensions. Instead, Labour prefer to say that all you should have to do to qualify for a state pension is to have lived here for a few years.
"Every few weeks we hear fresh rumours about Mr Blair’s thinking on pensions. When is he going to get Mr Brown to agree to something so people can see what Labour’s proposals really are before a general election?"
Stakeholder Response: Association of of Consulting Actuaries
A sokesman for the ACA said: "The ACA is supportive of a consolidated state pension [one state pension replacing the basic state pension plus the state second pension, with this set at a higher level to meet essential living costs. This could be financed by a higher state pension age phased in over a number of years.
"A citizen's pension holds a number of attractions in that it could simplify state pensions - reducing administration - and it could ensure those with a shorter NI contribution history, notably women, receive a higher basic pension.
"The difficulty with the proposal may be setting the 'minimum' qualification for a full pension. If this were set at a relatively low level, say 10 years' residency, might this not be resented by those who may have 'saved' for 30 - 40 years under the present state arrangements?
"Also, there might be a danger that the citizen's pension would be held down to a lower level because of a significant increase in the numbers entitled to a full pension.
"Over time, it needs also to be remembered that an increasing number of women will achieve contribution records every bit as long as men if they work before and after career breaks as they gain credits to their pension throughout the period they are caring for children.
"Finally, a non-contributory based citizen's pension might draw into question what people pay national insurance contributions for.
"Whilst collection of NICs from those subject to PAYE would probably be unaffected, there might be greater difficulty in collecting NICs from those outside of the PAYE system as there would be an increased feeling that NICs were not 'buying' the same level of forward benefits."
Stakeholder Response: Help the Aged
Mervyn Kohler, head of public affairs at Help the Aged, said: "The contributory principle as a mechanism for qualifying for a state pension goes back to the 1940s and a labour market which is now history. It disadvantages women and others with intermittent or broken work records, people with poor health or disabilities, and migrants with shorter working histories.
"In retirement, all of these are theoretically protected by our complex web of means-tested benefits, but it is well known how inefficiently these are claimed - this month's DWP benefit take-up figures suggested that nearly £3bn of potential pensioner benefits is going unclaimed.
"The citizen's pension would address most of these problems. It is a modern solution, which fits with our modern labour market, and it is a concept which Help the Aged supports.
"If paid at the present state pension rate [£79.60] it would represent a modest step forward. If paid at the pension credit guarantee level [£105.45], it would provide a realistic foundation for pension planning and a key instrument in combatting pensioner poverty."
Stakeholder Response: ARPO50
John Ball economist at ARP050 said
"ARP050 welcomes proposals which will reduce the need for means testing of pensioners incomes. A sensible Citizens Pension might help attain this desirable outcome. However, the idea has been floated several times in the last decade. The devil is in the detail. It has proved impossible, hitherto, to devise a Citizens Pension which gives better prospective pensions to British residents without opening the floodgates to entitlement to British pensions to temporary migrants from EC and Commonwealth countries. The government need to show how they have cracked this problem.
"Perhaps more important, they also need to say in more detail than has emerged so far what the objectives of the Citizens Pension will be. With respect to basic pension; the various NI credits, such as Home Responsibility Protection (HRP) for mothers with children under 16, ensure that it is possible for mothers and the disabled to qualify for a full basic pension with as little as 20 years NI contributions. HRP has now been in place for nearly 30 years. GAD have projected that in future virtually everybody who spends a lifetime in Britain will retire with a more or less full basic pension. With respect to supplementary pensions; it was only in 2000 that this government abandoned HRP in SERPS and replaced it with the far less generous arrangements in S2P so it would be surprising if the aim was to boost supplementary pensions via the Citizens route. It could be that the government have come up with a big step forward in the pensions area but until more detail of aims and methods is forthcoming we
will not know."
