Workers "Pay £5 a week" to get benefits

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    Workers could be forced to pay at least £5 a week into a personal “welfare account” to qualify for higher benefits if they lose their job, under a plan being considered by George Osborne.

    In a recent report, the Policy Exchange think-tanker proposes a shake-up of the welfare system to strengthen its original “contributory principle”, under which the amount people receive in benefits is linked to how much people have contributed.

    Allies say the Chancellor, George Osbourne is very keen to extend “personal responsibility” in the welfare system. The report is being studied by the Downing Street Policy Unit and the proposed reforms could be signalled in the Conservatives’ general election manifesto.

    The Policy Exchange plan would set up a “compulsory collective insurance scheme”, that everyone working more than 20 hours a week would pay £5 a week.

    It would be run by private-sector providers such as insurers and fund managers, but guaranteed by the Government itself. This think-tank estimates that the shake-up would save the Government £2.5bn a year as people became more self-reliant.

    The Government would offset the £5-a-week payments by proposing to reducing workers’ national insurance contributions.

    The payments from workers would raise £8bn a year, of which £2bn would go into an unemployment insurance scheme. It would replace the £72-a-week contributory jobseeker’s allowance, which is currently payable for six months to people who have been in work for two years regardless of their savings. The 4.6 million self-employed would qualify for the first time. The other £6bn raised would go into the individual accounts.

    Under this proposed welfare scheme, the jobless could increase their benefit by £20 a week by dipping into their personal welfare account and draw it for longer than six months.

    If they wanted to, the higher earners could pay in up to an extra £100 a week, and could use their fund to retrain if they lost their job or during other emergencies such as ill-health. If they didn’t need the money during their working life, it would provide a £10,000 top-up to their pension pot when they retired.

    Good idea or bad?

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