Pension scheme means tax rise for millions

Among proposals the government is expected to confirm tomorrow is a single flat-rate state pension, equivalent to around £144 in today's money, to be introduced for new pensioners from 2017.

The official reason given is that it's a bid to "simplify the system" but around six million workers will face higher national insurance payments in future as "contracting out" the state second pension to employers ends.

Those affected are expected to include more than a million private-sector staff enrolled in final-salary schemes and an estimated five million public-sector workers.

General union GMB national officer Brian Strutton said new plans would have a "very serious consequence" - an increase in National Insurance contributions, which employers and employees in defined-benefit pension schemes will have to pay.

Mr Strutton said most defined benefit scheme employers and members will find this unaffordable so will need to renegotiate their schemes.

"A good example is the Local Government Pension Scheme which has just been reformed by unions and government and would face an unaffordable extra bill of several hundred million pounds.

"Just as the Treasury legislation to reform public-sector pensions is going through Parliament, the Department for Work and Pensions is proposing to blow it out of the water by completely rewriting the state and occupational pension landscape."

Unions were involved in a bitter dispute with the government last year over its controversial public-sector pension changes and it led to a series of strikes.

A white paper is being published tomorrow setting out the new proposals.

Shadow pensions minister Gregg McClymont said the coalition had originally suggested the reforms would be introduced in 2016.

"The chaos surrounding the government's relaunch gets worse and worse. These proposals are just half a plan yet they are still delayed by a year.

"With the granny tax, this government has already established a track record of incompetence and secrecy so we will look at the detail."