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
    +2

    Comment number 84.

    it's about time there was another peasants revolt.

  • rate this
    +4

    Comment number 83.

    I gave up on there being a state pension 30 years ago and have saved since the word go! The only problem is that I still have to save a hell of a lot more before I can retire as the cost is horrendous and the chance of living into one's 90s is increasing all the time! The golden age to retire was 10 - 20 years ago, ever since it has been getting worse and will continue to do so!

  • rate this
    +3

    Comment number 82.

    The question as to whether £144 is enough is a fair one. A late relative who had paid up all his contributions received around £40 more per week so its clearly a cut for those without any other form of pension (public or private). Not on. Standard rate should be raised to around £180.

  • rate this
    +7

    Comment number 81.

    Government makes changes, people end up worse off, in other news water is wet.

  • rate this
    +15

    Comment number 80.

    In the 1980s, I stuck with SERPS (State Earnings Related Pension Scheme) rather than opt out in to private pension on the understanding that if I paid in more, I would get more back. I have paid more that I had to ever since and now it seems that counts for nothing - I'll get the basic pension like everyone else. Can I Sue?

  • rate this
    0

    Comment number 79.

    So Communism is about to become the law in ENGLAND... What is the bet that Scotland, Wales and NI opt-out?
    And what is the correlation between how much the government HMRC steal (oops..."TAKE") from our meagre earnings?

  • rate this
    +1

    Comment number 78.

    Isn't it about time the unions stopped complaining about who is worse off or not. We can't all be better off when there is only one pot. As I understand it before it was possible for somebody who had made no contributions to actually have a better pension with top ups than somebody who had contributed all their life. Its never going to be fair when people who don't want to work are mollycoddled.

  • rate this
    +4

    Comment number 77.

    31.Giles Jones - " People of a pensionable age will have had low house prices and free university education. They have had plenty of time to save up for a good retirement"


    What about Wages in relation to Prices at the time?

    Disposable income in relation to food prices and other essentials has to be taken into consideration when comparing generations and their ability to save

  • rate this
    +9

    Comment number 76.

    Quote // 71. Mattthepap
    "But on average, it concluded that women would be around £270 a year better off, and men would be £81 better off."

    Funny how most of the commenters missed this. //

    Which equates to a Loaf of Bread a week for a Man and three Loaves and a Pint of Milk for a Woman.

    Yes I can see how earth shattering that is!

  • rate this
    +19

    Comment number 75.

    Dear England,

    Please, please, please stop voting for the CONservative party.

    They'd liquify you and make you into soap if they thought it would make more money for their rich friends and shareholders.

  • rate this
    +80

    Comment number 74.

    just because people are living longer it doesnt mean you can all work longer....some can some cant. getting to 65 is the same now as its allways been ...65 years of body wear.

  • rate this
    +4

    Comment number 73.

    People complaining about having their pensions taxed are the lucky ones. I'm 26 and I don't expect to be able to retire.

  • rate this
    +64

    Comment number 72.

    What's all the whinging about, everything is just fine isn't it? The MP's and banker's pensions are all nicely secure aren't they?

    Serfs & plebs should be grateful, why only yesterday I heard the home secretary woman say on TV that governments first responsibility was the safety of the citizens, the top people naturally have the deep bunkers & the rest of us have our understair cupboards..

  • rate this
    -2

    Comment number 71.

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

    Funny how most of the commenters missed this.

  • rate this
    +1

    Comment number 70.

    Further to my comment at 29 I also believe that in the future if an individulal has an industrial pension at or above a determined level they will not be entitled to a state pension despite having contributed to it. If the state pension is not paid then contibutions should be repaid to the individual plus of course compound interest.

    People seem to have forgotten it is a LEGAL contract.

  • rate this
    -49

    Comment number 69.

    Everyone has had plenty of time to get a private pension by now, those that haven't bothered should face the consequences of their actions.

    My own plan is to retire in North France, I wont need to draw on my state pension at all so that will be be my gift to the nation.

  • rate this
    +7

    Comment number 68.

    Another example of this government making things worse for the average worker. We've got another 2 years of this (and then another 5 I would expect)

  • rate this
    +1

    Comment number 67.

    BREAKING NEWS: Union disagrees with government decision. Shock horror.

  • rate this
    +3

    Comment number 66.

    More old people = less money in the pot for pensions.

    50. David Horton

    What about people who haven't paid into it, that have always lived in the country? I know loads of people that play the 'can't get a job' card, when I know fully well they are lazy ****s.

  • rate this
    +10

    Comment number 65.

    Giles Jones what do you know. People of pensionable age didn't all go to university as youngsters do today, we went out to work. I had to have 39 years worth of national insurance contributions to claim my pension and my husband 45 years. Also when we purchased our first house (at the age of 36) interest rates were sky high. Young people these days have never had it better.

 

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