The Liberal Democrats

The Liberal Democrats believe that pensioners have a right to dignity and security in retirement. This means that as many people as possible should have sufficient state and private pension rights to lift them clear of the means-tested safety net. In contrast, Government policy is to allow people to retire poor, and then to force more and more pensioners to claim means-tested top-ups in order to achieve a decent income in retirement.

The Liberal Democrats have recently launched an expanded version of our pensions policy trailed at last year's General Election. We propose to introduce a universal, non-contributory Citizen's Pension to all pensioners over state pension age, which will be based on a residency test. This will particularly benefit women, as the current system discriminates against those who stay at home to care for their children and/or work part time, and who have patchy NI contributions.

The Citizen's Pension will be paid at the level of the 'Guarantee Credit' part of the Pension Credit (currently £109.45 per week for a single person), and will be increased in line with average earnings to ensure that its real value is protected. This will ensure that pensioners can genuinely share in the growing wealth of the nation. Single pensioners over 65 would therefore receive a current increase of more than £100 per month, and pensioner couples would receive an increase of more than £140 per month. The Citizen's Pension will also float people off the Pension Credit and so dramatically reduce the number of pensioners forced into the scope of the means-test.

We have also outlined our proposals on the state pension age. We would oppose any increase in the state pension age which was not part of a radical package to improve the level of the state pension, but we believe that it should be increased to 67 in order to fund a decent Citizen's Pension. This change would require a lead in of at least 25 years, exempting those aged over 40 at the time of the announcement. We would also establish a permanent Independent Pensions Authority, to advise on any future changes to the state pension age and pensions affordability.

We will also take radical steps in the area of occupational, private and public sector pensions, including:

SIMPLIFYING SAVING - occupational schemes will become "opt out" schemes rather than "opt in" schemes, so that employees have to make a conscious decision not to save in the scheme;
TRUST IN PENSIONS - providing affordable, low cost, personal pensions for those on lower incomes by introducing a 'BRITSAVER', a low-cost defined contribution scheme with a choice of funds including a low risk option run by National Savings;
OFFERING CHOICE - removing the requirement to buy an annuity at 75, so that people can decide for themselves how to use their savings, and encouraging employers to offer portable pensions as well as company schemes;
REFORMING PUBLIC SECTOR PENSIONS - public sector pensions, including those of MPs, will be reformed so that these schemes are sustainable, while being fair to taxpayers. We will establish in an independent commission to look at public sector pension reform.

The Liberal Democrats also want to encourage a new perception of retirement. It is out-dated to see retirement as a sudden event, or cliff edge, so that people are full-time employed one day and full-time retired the next. We want to give more power to individuals to make their own choices about how and when they retire, without them being constrained by arbitrary rules. We therefore need to establish and enforce robust laws against age discrimination. This must include provision for equal access to education and training, as well as a change in the culture towards older people in the workplace.

Together, we believe that this package of measures will bring a significant financial benefit to pensioners of all ages, and will help to secure our goal of dignity and security in old age.

David Laws MP
Liberal Democrat Shadow Secretary of State for Work and Pensions

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