TUC: Pension changes will make millions worse off

 
money in hands State pension changes will leave some people with less money in their hands, and some with more

Millions of people currently entitled to the state second pension will be worse off as a result of the government's pension changes, the TUC has claimed.

The report says that anyone with a long working history is likely to lose out, by as much as £2,000 a year.

The second state pension will be abolished when the new single-tier pension begins in April 2016.

But the government said the changes will make most people better off.

Around 20 million Britons are currently part of the state second pension scheme, introduced 10 years ago to boost pension levels for low earners.

The TUC report suggests that the "vast majority" of them will get less money when they retire.

"Many low and middle-income private sector workers, particularly those several decades away from retirement, could be thousands of pounds a year worse off in retirement," said Frances O'Grady, the TUC general secretary.

The Trade Unions support the principle of the single-tier pension, but want it to be raised from the current notional level of £144 a week.

'Better off'

However, the government said that most people retiring after 2040 would be better off with the new pension over the course of their retirement.

"The flat rate will provide a fair base, set above the basic level of means test, helping people to know how much they need to save for the kind of retirement they want," said a spokesman for the Department for Work and Pensions (DWP).

A report by MPs on the Work and Pensions Committee in April 2013 supported the idea of the new single-tier pension, but said the government needed to be clearer when explaining it to the public.

The MPs concluded: "It will mean more state pension for many people, particularly low-earners, in the short to medium term."

But a previous report from the Institute for Fiscal Studies (IFS) found that people born later than the mid-1980s would be worse off when the single-tier pension was introduced.

It said that low earners could be £1,000 a year poorer, while high earners could lose £2,300 a year.

New State Pension

  • Begins April 2016
  • Paid at a flat rate
  • Replaces second state pension
  • Worth £144 a week
  • Needs 35 years of contributions

But on average, it concluded that women would be about £270 a year better off and men would be £81 better off.

Low earners

The TUC study claims that anyone on a median income of £26,000 a year, and who has a full employment record, will be worse off as soon as the new pension is introduced.

Such a person retiring in 2030 would receive £1,500 a year less than under the current system.

Someone retiring 10 years after that would be £2,000 a year worse off.

Low earners, on an income of £10,000 a year, will be better off if they plan to retire soon after the changes are introduced.

But such people retiring in the 2040s will be up to £1,700 a year worse off.

Pensions expert Malcolm McLean, of consultants Barnett Waddingham, said the TUC report was broadly correct.

"It was always the case that there would be both winners and losers from the new scheme which the Treasury had dictated had to be introduced at no overall extra cost," he said.

"The real message for young people in particular is to try to build up for themselves a private pension to supplement the state pension," he added.

And the government argues that it is doing a lot to help people save through private-sector pensions.

Under its auto-enrolment programme, employers have to sign people up to their pension schemes, unless they choose to opt out.

In the last year, it says that 1.4 million people have been signed up to workplace pensions as a result.

 

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  • rate this
    +34

    Comment number 24.

    so yet again the hard working get shafted,

  • rate this
    -4

    Comment number 23.

    It is high time most people in this country adopted the cultures from Asian countries wherein the parents take care of the kids till they get a proper job and the kids take care of the parents till they die. Living as a family in the same house with parents gives more financial stability for the kids and will help them secure better roles in life. Indians living in the UK are the classic example!

  • rate this
    +4

    Comment number 22.

    The current government pension scheme has failed and who is to say that the new scheme won't go the same way . Your better off looking into a works or private pension as the current government will on disappoint you once again

  • rate this
    +122

    Comment number 21.

    The problem is the way government operate. When I was about 18 years old I had to pay in to SERPS, but the government did not invest the money they spent it, if a private company did that they would be locked up. Now I am retired the state pension is not made up of my payments but is being paid by todays tax payers. The trouble is that it has gone on for so long there is no easy way out.

  • rate this
    +3

    Comment number 20.

    A very weak article. When it comes to spending taxpayers money trade offs will have to be made. An ageing population means that there is a limit to how much can be paid to pensioners. Low earners, women and the self employed will benefit.

    I notice that the TUC focus on private sector workers. Public sector workers are still priveleged recipients of taxpayer funded generosity.

  • rate this
    0

    Comment number 19.

    I have no idea whatsoever whether or not the claim by the TUC is correct but experience indicates that most claims made by trade unions are not.

  • rate this
    +7

    Comment number 18.

    Those who are lucky enough to make it to retirement, will be worse off, this has been the case for years.
    Fortunately I had made provisions for in my early twenties. Now approaching 50 I find myself increasingly thinking about taking out the lump sum and spending it. As I may not get the chance.

  • rate this
    -2

    Comment number 17.

    Cut public sector pensions and use the incremental cash to up state pensions to the private sector. This would be fair.

  • rate this
    +5

    Comment number 16.

    Do having been encouraged by the government for 25 years to pay into a second pension they are now going to steal it from me. We have a word for people like that where I come from. Thats one vote lost forever.

  • rate this
    +7

    Comment number 15.

    I know a lot of people won't like this comment but it's a fact that whatever the Tories do with pensions or any other benefit reform those who are poor now will get even poorer. I have learned over the years that the only people who benefit from any Tory changes will be those already doing OK. Don't forget that the loss stated for the rich will be made up from private pensions and investments.

  • rate this
    +69

    Comment number 14.

    If we have now all got to make private pension arrangements, does that mean that our N.I contributions will be adjusted to allow for the fact that government will no longer be paying it? Or am I just being incredibly naive that, having paid in for x number of years, a part of our N.I is being used to fund our retirement?

  • rate this
    +2

    Comment number 13.

    At the moment all people when they reach the required age get a state pension. This should change. If you have chosen not to work and pay taxes then it should be up to you not the state to support yourself in your old age. This will leave much more in the pot for those who have meaning an excellent pension can be paid.

  • rate this
    +1

    Comment number 12.

    If you have had your head stuck in the sand you will be unaware our country cannot afford what it is paying now, it is time to accept we should make our own arrangements.

  • rate this
    +7

    Comment number 11.

    No surprise, a government department lying after the facts have been laid bare. This with the debacle of the benefits system is just another symptom of an out if touch government.

    What next ? Selling the banks and losing another few truck loads of tax payers money?

    Well at least they can't argue against New Labour's loss of money in government. This one should do that in 5 years and not 13

  • rate this
    -68

    Comment number 10.

    Private pensions are the way ahead! The government should abolish the contributions that go towards state pensions and simply leave it to the individual to decide what pension plan is best!

  • rate this
    +5

    Comment number 9.

    "However, the government said that most people retiring after 2040 would be better off with the new pension over the course of their retirement."

    This government said - so it must be true...

  • rate this
    +59

    Comment number 8.

    People would probably love to invest in their own pension fund, though low wages are not likely to promote such investment.

  • rate this
    +3

    Comment number 7.

    Since my !"£$%^&* of a boss stopped paying me, taking my pension is a promotion!

  • rate this
    -1

    Comment number 6.

    1.finbarthesage

    People need to make their own arrangements, it has been obvious for years that the younger generation will be unable to support the increasingly aged population.
    ===
    If there's not a working population to support the retired then no amount on money will support them, money of itself has no value. When will people understand this simple fact - you cannot live by eating gold.

  • rate this
    +90

    Comment number 5.

    This is another reason why we need unions. Someone has to stand up for the little guy. Because our government won't. In fact our government will take them for whatever they can get.
    Hundreds of years of history has shown that when bosses, national or industrial, have no challenge, they become arrogant greedy and selfish. But in the UK they are removing all means of gainsay. Trouble ahead!

 

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