As the conference season ends, pledges and rhetoric will give way to decisions and action. High on the political agenda is pension reform. Tony Blair told the Labour Party on September 27th that the government will publish its plans in 2006 after getting the recommendations of the Pensions Commission at the end of this year. Simplifying Britain's notoriously complex pension system is common ground. The state itself provides a confusing set of tax-financed benefits. Two are based on national insurance (NI) contributions, paid by employers and workers. Employees build up not just flat-rate rights to the basic pension but also earnings-linked rights to the state second pension (S2P). Many are also likely to become eligible for the pension credit, a means-tested top-up. Many reformers yearn to replace this muddle with one state pension. The National Association of Pension Funds (NAPF) and the Institute of Directors (IOD) recently published proposals for a single pension. Both said that such a reform would eliminate another complexity that is virtually unique to Britain's pension system: contracting out.
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