There is to be a basic state pension of £140 per week introduced to replace the age-related allowances and a linking of the state pension age to life expectancy.
Firms were broadly in favour of the changes, which will happen alongside the implementation of auto-enrolment and workplace pensions at the end of this year.
Ian Naismith, savings expert at Scottish Widows, said: “We welcome the announcement that the single £140 per week state pension is to go ahead. This is a worthwhile simplification of the system and will bring clarity on what individuals can expect from the state. They can then work out how much they need to save themselves.”
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “The scrapping of the age-related allowance makes sense in the context of the rapid increase in the personal allowance. The age-related allowance is means-tested and as a consequence it is somewhat inefficient.
“The longevity linked state pension age makes sense, however this will present challenges for pensions which are linked to state pension age such as final salary schemes and defined contribution pensions with automated lifestyle investment strategies.”
Kate Smith, regulatory strategy manager at Aegon, said: “The move to a flat-rate basic state pension is a welcome simplification though we will need to wait for the details to find what impact there may be for the self-employed, people who have built up large amounts of state second pension or who’ve been contracted out of the state second pension.”
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