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Chancellor fast-tracks state pension changes

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Chancellor George Osborne is to bring forward the introduction of the flat-rate state pension and the cap on social care by a year.

He told the BBC’s Andrew Marr Show the planned £144 per week state pension will now begin in April 2016 rather than 2017.

The cap on social care, which will now be set at £72,000 instead of £75,000, will also come into force in 2016.

He will use Wednesday’s Budget to make the announcements.

The Treasury estimates the shift will bring 400,000 more people into the simplified state pension system.

Osborne said: “It’s a huge boost for people who want to save for their retirement.”

Hargreaves Lansdown head of pensions research Tom McPhail said: “This will be welcome news for the tens of thousands of women who would have missed out on the higher state pension as a result of reaching their state pension age just months before the introduction of the new terms.

“The pensions system is highly complex and this announcement will have knock-on consequences, notably for final salary scheme members who are likely to see their scheme terms adjusted a year earlier. It also illustrates the unpredictability of the pension outcomes, whether from changing investment conditions or from the government changing the rules.

“Pension providers have an important role to play in helping pension members to adapt their arrangements in the face of these constantly changing circumstances.”

National Association of Pension Funds chief executive Joanne Segars questioned whether the changes were achievable in the “very tight timeframe”.

“We are squarely in favour of these vital reforms, but the government must ensure that the implementation of these changes is workable for pension funds. This is a very tight timeframe and we have to wonder if it can be delivered.

“If the government gets it wrong then this runs the risk of sparking a fresh round of final salary pension closures in the private sector.

“Businesses who get caught on the wrong side of these changes will lose a significant rebate from the end of contracting out, and they will question whether they want to continue running these pensions. It is essential to give pension funds the flexibility and time to adapt and make the changes.

“We have waited many years for these reforms. An overhaul of the state pension is long overdue and this simpler, fairer system helps set a clear foundation on which people can build their own savings. It would be a shame if big mistakes were made in a rush to implement the changes.”

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