Pensions have been left up in the air by the new government following yesterday’s announcement of their economic plans for the next year.
Chancellor George Osborne announced £6.2billion in public spending cuts, which will come from some frontline services and public sector cut backs.
One of the casualties of the cuts was the Child Trust Funds, which will be axed by January saving £520 million over all. And other savings included £683 million at the Department for Transport, £780 million at Communities and Local Government, £836 million at Business, £670 million at Education and £325 million Department for Justice.
But the coalition’s plans for pensions still remain ambiguous, with pensions minister Steve Webb making seemingly little commitment to any of their future policies.
What we do know is compulsory annuitisation at 75 will be scrapped, the retirement age is set to rise and pensions will be linked back to earnings but these plans are likely to be introduced gradually over the next five years.
Speaking to the BBC's Money Box programme yesterday Webb skimmed the issue saying he ‘would not settle for minor adjustments.’
“A decent state pension doesn’t come cheap. So you have to think long term. But if we always thought reforms weren’t worth doing because they’re going to cost a lot of money then you are cursed with incrementalism and we cannot go on like that,” he said.
But he made no mention of Nest, the billion pound personal accounts scheme that is due to roll out in 2012, instead he said the government would be focusing on auto enrolment.
Nest is planned to create an occupational scheme for those not currently enrolled in one by their employers. People will be automatically enrolled and will have to opt out.
He added: “One of the other things we’re looking at is making sure that when someone is in a job that they are saving in a pension as well, through auto-enrolment so it’s not just about state pensions it’s about a vibrant private system as well.”
But despite the pension mystery many have praised the government’s move to make cuts so quickly after coming to power.
The Confederation of British Industry’s director general, Richard Lambert said: “It is encouraging that the Treasury has managed to find slightly bigger savings than first expected.
"The measures announced by the Chancellor, including departmental spending cuts and a civil service recruitment freeze, are painful but necessary steps to demonstrate the UK's seriousness about tackling the deficit. Just as private sector firms had to take strong action to cut costs during the recession, so too must the public sector.”
The official budget will be announced on June 22.
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