Sir, The proposal from the National Association of Pensions Funds for a citizen's pension ('Citizen's pension "could be in place by 2010" ', December 6), paying a flat rate based on residency rather than National Insurance contributions, has considerable merit. For employers, National Insurance is a considerable overhead and is an antiquated system based on weekly wages; this in an economy where only nannies and footballers still have their pay quoted weekly.
The NAPF suggests possible administrative savings, but this significantly understates the potential. The costs of National Insurance administration in government alone are immense. It involves thousands of staff and massive information technology systems, and tracking the minutiae of people's movement in and out of employment and changes in their salary and other circumstances over their working lives - all to make very small adjustments to the state pension they will eventually receive.
There is little doubt that the net present value of National Insurance administration carried out over half a century far exceeds the savings to the state of lowering the basic pensions entitlement for some people.
The citizen's pension is an attractive idea: one that should be evaluated in the context of significant administrative and cost of compliance savings, as well as its ideological simplicity.
