Although the focus of this blog is largely on company funded employee benefits, it’s impossible to look at these benefits in isolation. Many benefits rely on some level of underpinning from the state benefit system, and are often designed to dovetail with such offerings.

A key part of that structure (in fact a founding compent of the welfare state) is the right to a state pension, funded by a social insurance payment. In the UK, that social insurance payment is more commonly known as National Insurance.

Two announcements made by George Osborne today have implications here. The first is as follows:

“I can confirm today that there will be an automatic review of the state pension age to ensure it keeps pace with increases in longevity.

Details of how this will operate will be published alongside the OBR’s long term fiscal sustainability report this summer.”

Attendees at our recent event will recall that I speculated that the latest increases to State Pension Age would not be the last, and it now looks like this will become a constantly moving target.

Whilst at first glance this may not appear that significant to employers, it should be remembered that the Default Retirement Age was recently scrapped. Given this, many employees will continue in work until (and if) they can afford to retire. That point is likely to be moving ever further away if state pension age is regularly increasing.

Which leads to our second announcement. For many years it has been mooted that the structure of the state pension calculations needed simplification. Much progress has been made on this of late, and Mr Osborne’s speech included the following quote:

“Now, we want to simplify the Basic State Pension and its interaction with the second state pension.

I pay tribute to the work my HF Pensions Minister has done on this.

Such is the complexity of this means tested system, only someone like our Pensions Minister can work out exactly what someone’s entitled to - and what they need to save.

So I can confirm that we will introduce a new single tier pension for future pensioners, set above the means test.

This is currently estimated at around £140.

It will be based on contributions.”

So to sum up, payment of the state pension may now be further away for many, but at least the state payments will be much more easy to quantify and plan against.

Best regards

Steve