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
    -1

    Comment number 464.

    We need a real party to sort out this country. A party whose leader cares about the electorate. A leader who won't 'save money' by robbing the elderly while continuing to throw money at foreign aid and the EU. We need... dare I say it on the BBC?.. UKIP

  • rate this
    -44

    Comment number 463.

    Typical TUC negativity - focussing on a small minority who may lose out rather than the vast majority who will gain.

    Benefit/pension changes will always inevitably lead to a few losers, but Prof Steve Webb (the Lib Dem minister who oversaw these changes) has produced a scheme which will ensure a decent, fair pension for the vast majority for the first time ever and he deserves credit for that.

  • rate this
    0

    Comment number 462.

    NI pays for NHS; Unemployment benefit; Sickness/disability allowances; and state pension. Dispute the absolute number but the fact remains that about 70% of the population are net “takers” from the system that is paid for by the top 30% of contributors. Nobody is depriving you of the essential safety net services you contributed towards. But your future longer life is your responsibility.

  • rate this
    +2

    Comment number 461.

    in business, if a contract was made and payments towards that contracts had started, that contract can not be changed half way through without an "Opt out" clause. Tax seems to be the only exception to this. if you pay in tax, you can't expect anything back. yet for someone earning 25k, they can expect to pay 5k income tax, 2.5k NI, 1.5K VAT which is 35-40% then there is Council tax, fuel tax etc.

  • rate this
    +3

    Comment number 460.

    The main problem with the state pension was that it (along with other NI payments) was spent by governments as just additional taxes instead of being placed in a pot to be accessed later (or at last a proportion of the payments). This, added to with the North sea oil windfall instead of being spent by the tories, would have created a sizeable pot to draw on.

  • rate this
    -3

    Comment number 459.

    The fact is that neither Labour nor Conservative have any idea how to straighten out the economy without hitting joe public (they (Lab/Con sure as heck are not going to hit themselves oh and that includes Union leadership). They need to know via the ballot box (hung Parliament after hung Parliament) that we are not going to take it anymore, perhaps then they will effect meaningful change.

  • rate this
    +4

    Comment number 458.

    The government ought to at least make sure past contributions are recognised, so that people aren't worse off as a result.
    Changing the future, fine. Not giving people what they have already paid for is totally out of order, and attempting to break past agreements.
    Having a simpler system for future contributions, along with the 'opt out' pension, fine.

  • rate this
    +2

    Comment number 457.

    And this suprises people? Why?

  • rate this
    +4

    Comment number 456.

    Of course we're all worse off, we've got a Tory government, what do you expect?

  • rate this
    +3

    Comment number 455.

    I see that we have the usual selection of CON party minions on here doing there shift of positive propaganda on here.

    I don't know in whose mind it is OK to keep taking from people inthis country who have paid in all their lives, bbut i have to say more fool you for going along with it. I realised looking at the evidence what they were 20yrs ago and so have given up trust of the state yrs ago.

  • rate this
    +3

    Comment number 454.

    The whole pensions situation has become desperate. Those at least with state pensions now got what they were due. Those women born in 1954 have been cheated - their pensions put back 5 or more years and then on top another year or so - so they have lost out terribly and this was not graduated up to their birth years - it was just cut without any chance to make provision. This country is a mess.

  • rate this
    -2

    Comment number 453.

    443.John_from_Hendon
    Set up a SIPP then. You get the same tax breaks as a pension fund and you manage it yourself. You obviously won't charge yourself commission and can decide where you want to invest

  • rate this
    -7

    Comment number 452.

    When will the BBC stop from publishing humbug from the trade unions and the Labour (unemployed) Party and start giving us some real news. Like the economy is starting to grow etc. all doom and gloom and never happy news. Major PIA's employed in your news offices I think. If you have no good news then say NOTHING that is the best way believe me. Chuka Amuna never has anything positive to say!

  • rate this
    -2

    Comment number 451.

    S-C-R-O-U-N-G-E-R-S.....


    SAVE, DO not expect the rest of us to subsidise your idleness.

  • rate this
    0

    Comment number 450.

    @424 Bus? He's gone to ATOS with a bad back? Via Scotland Fracking Good they love him!

    PS Are how are the poor!!!!!

  • rate this
    -9

    Comment number 449.

    Another example of how the baby boomer generation have stolen from their grandchildren. We're now paying their pensions with the money that should be used to invest in OUR pensions.

  • rate this
    0

    Comment number 448.

    So the average low paid worker is £1500 a week worse off due to changes in benefits etc. yet is expected to start paying in to a private pension scheme,

    Beware. look at the very recent past record of pension plans being worthless'
    Best plan is work til you drop. It's what the Tories want you to do anyway.

  • rate this
    +4

    Comment number 447.

    People who think individuals should be left to make their own arrangements are being naive or stupid or both. One of the reasons for the introduction of the state pension was that many people were unable or unwilling to do so and we as a society found it impossible to say "hard luck - now die."

  • rate this
    -3

    Comment number 446.

    The new pension will make people better off. If the divel coming from the TUC is even remotely correct and my figures say otherwise, it would be prudent for people to do a little investing to make up the short fall.
    Reliance on the state for social support so one can buy teles, mobile phones & new cars should have stopped years ago but it took Labours downfall to show one cannot spend spend spen

  • rate this
    -3

    Comment number 445.

    Why does everyone expect the government to pay their pensions? Everyone should be responsible for their own pensions and finance their own regular pension plans. It is time to remove social benefits to all regardless of circumstances and only have state and child benefits for the chronically ill, seriously disabled and with other incapacities. Be responsible, stop drinking and smoking it away.

 

Page 34 of 57

 

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