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
    +23

    Comment number 64.

    Well, top o' the Market to yer !

    Everyone knew the Pensions were being cut to reduce the Tax burden on the Rich, so why would anyone be surprised to find out the Pension is lower , worse than the previous scheme ?

    Wake up and smell the Java !

  • rate this
    +7

    Comment number 63.

    We give millions away each year to other countries and this has to be at the expense of our own. Governments need to remember that charity begins at home. However the state pension is not a charitable gift, it is a fundamental right by virtue of the fact that people have paid into this system. It's no good bringing immigrants to 'prop up' the pension system as this will create a long term problem.

  • rate this
    +15

    Comment number 62.

    How can it be fair when someone has paid NI contributions for 44 years and who gets the basic pension will not get the new propiosed basic pension unlike those that will have paid less contributions. Present pensioners on the basic pension will remain as they are. Only new pensioners will benefit.

  • rate this
    0

    Comment number 61.

    According to:
    http://www.telegraph.co.uk/finance/personalfinance/pensions/9817508/New-state-pension-how-am-I-affected.html
    'flat rate' pension is a misnomer. Perhaps the year when the pension is generally flat rate for all (i.e. 2016 plus the number of years for the final contracted out person to be disadvantaged) should be used for the avoidance of doubt? Such articles are at best misleading??

  • rate this
    -59

    Comment number 60.

    Let's go back to basics. The state pension was never meant to be something to live off but to support what you had provided for yourself. The nanny state mentality has created the view that people must live of the state pension. Time we all took responsibility for ourselves and made provison for our own retirement.

  • rate this
    +5

    Comment number 59.

    I see the tory party briefers are out in force in the comments section this morning. Shouldn't you people be doing something useful like trying to fix the economy that you have make so much worse or splitting high street from investment in the banks? Oh yes, of course, you won't be doing that anymore, despite your pledges to do so.

  • rate this
    +5

    Comment number 58.

    This new pension provision actually benefits those who have never worked. Those of us who have and have paid in will lose the benefit of our second pension contributions. This government is hammering anyone who has saved for their old age, low interest rates, bad annuity rates and now a low "new pension" They must think we are blind not to see we are being shafted!

  • Comment number 57.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +3

    Comment number 56.

    pension funds are mostly a scam waiting to happen, they get given to posh boy traders to play with how they like and inevitably they will mess it up and you could well be left with nothing. it's going to blow up in a decade or two and people are really going to regret paying in to these pyramid schemes.

  • rate this
    +3

    Comment number 55.

    Pensions Auto-enrolment is now being implemented by medium size employers. All small employers will follow before October 2017. This will allow all workers, many of whom were previously denied access to S2P, an opportunity to take control of their pension provision without relying on taxpayer funding. I thought all parties including unions were fully supportive of this change.

  • rate this
    +5

    Comment number 54.

    Did anyone seriously believe that this government was making this change for the benefit of the pensioners? Wise up. This is UK plc where the government exists to make a profit for its toff shareholders!

  • rate this
    +6

    Comment number 53.

    Some people will be better off is an irrelevant distraction. No one should be worse off by changes imposed. Otherwise, how can we expect young people to save for their retirement when schemes are changed at every political whim?

  • rate this
    +1

    Comment number 52.

    Another day, another kicking.

    Welcome to Cameron's Britain.

    Can we *please* get this scum out of office.

  • rate this
    +1

    Comment number 51.

    As a youth in the 80;s we were told that we needed to have private pensions to top up state pensions. So anyone born after the 80's cannot have any excuse but to expect the basic state pension will be just that, BAISC. It will pay for food, shelter & heating, & if you are careful some little luxuries.
    So this is a total non story, unless the TUC have actually invented their magic money tree.

  • rate this
    +40

    Comment number 50.

    This article is one dimensional.

    The issue isn't a thinner layer of money, it is a thicker layer of people.
    Sure, we are living longer, but that has been compensated for, in the extension of the pension age.

    The govt and its successors, owe it to those of us who have paid in to the system for years, to keep people who haven't paid in to it, out of the country.

    Then there would be enough money.

  • rate this
    -3

    Comment number 49.

    It's no surprise to see so many irresponsibly complaining about having less money.

    The fact is we are all living longer. This should be a great thing but somebody has to pay. Since we can also work longer, we and not other tax payers should pay more for our own future. We are only getting less now because the original pension was unsustainable and could have led to the collapse of the country.

  • rate this
    -22

    Comment number 48.

    Why is the next generation being saddled with the whole debt of the Baby Boomers, who made no contribution towards the disaster they created. For a 60's generation not short on opinion, there seems to be very little said here. On this subject they know they did very well leaving the next generation to pick up the tab. Shame on you! Young people move abroad, you don't have to pay for their party!

  • rate this
    +11

    Comment number 47.

    I spent 29 years paying into company pension schemes only to see the two pensions that I paid into the longest put into the PPF (which only pays a maximum of 90% of your pension). The 1st was a US corp who bought the company I had worked for & refused to pay any further contributions, the 2nd. so that the board directors could sell the company and pocket personal bonuses in excess of £5m each.

  • rate this
    +5

    Comment number 46.

    #25 Steve - but during this current period of austerity, despite there being "no money", the swathe of people who USED to pay the 50% tax rate have been getting wealthier and wealthier.
    If you're in the top 1%, you are in a group that has accumulated more wealth to pay off the deficit..

  • rate this
    +2

    Comment number 45.

    I'm only 20, but I know for the next 70 years my pension will always be in danger or lose worth and basically forever get further away.

 

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