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

    Comment number 484.

    It's a pity that things have to change. In an ideal world we wouldn't have over £1trillion in debt and everyone could live the life they want.

    Welcome to the real world.

  • rate this

    Comment number 483.

    Millions who paid tax/NICs but become pensioners before this scheme starts ( for which future pensioners will pay less but get more) will be worse off - granny tax, pension link to CPI not RPI, rampant inflation ( much higher than claimed),low interest rates to prop up housing market show the government hates pensioners. We vote:may not be able to act now but just wait for the next election!

  • rate this

    Comment number 482.

    #21 chg20b is right. I first read about the non-investment of our contributions back in the 60s in an article in either 'Encounter' or 'The Listener' (great mag). Let no government tell us it's a surprise that today's state pensions still come from today's workers and not from prudent investment. Other countries' MPs looked ahead and built national wealth funds. Ours built duck huts.

  • rate this

    Comment number 481.

    Anyone else here with the impression that in reality, we're a 3rd world nation, that has for far too long, been trying to live as a 1st world nation?

    Like an Essex hairdresser, who insists on driving a Range Rover, funded by a huge (and ever-increasing) debt.

    1/ Sustainable?
    2/ Trust politicians to solve the problem?

    1/ Nope
    2/ Never have so what makes you think they will in future?

  • rate this

    Comment number 480.

    473: "suppose a labour government borrowing trillions to keep people happy, then leaving it for another political party to deal with when they get voted out of power?"

    You mean EXACTLY like the current lot is doing, Pique?

  • rate this

    Comment number 479.

    Well done Ian Duncan Smith, another coup for the party. YOU should have remained party leader .... what a much better and fairer country we would have!

  • rate this

    Comment number 478.


    True, lifestyles are different, however back then the average rural house cost 3-5x average salary, and these days it is 12-20x the average salary. Regardless of lifestyle, todays younger workers can never hope to live in a decent house, we are all foced to live in badly made rabbit hutches crammed in ontop of others... all by design by 75yrs of incompetent government.

  • rate this

    Comment number 477.

    This proves that the TUC, and indeed other unions, are essential to bring matters like this to attention.. even the private sector, which will not have as many TUC members are being rightly alerted to this.

    Again, this devisive government shows it is for the few, the greedy, not the needy or deserving. Hard working? Do the right thing? SPIN.

    The CONservatives.. the clue is in the name.

  • rate this

    Comment number 476.


    Oh, that is a good idea! (sarcasm)

    Set up a SIPP eh - you are locked in to some legislative racket that can (WILL) be destroyed just before you actually get the benefit. A far better idea is to scrap these administrative rackets that keep the 'kiddies in suits' in business.

    Just give savers tax relief on the increase in their savings each year. Simple to do & no 'suits' required!

  • rate this

    Comment number 475.

    There seems to be a misunderstanding about state pension contributions.
    Payments into private schemes are savings you can draw on when you retire.
    State pension contributions are paid out to today's pensioners. You have to trust the government to provide your pension when you turn comes, but there's no guarantee of the amount or the form it will take.

  • rate this

    Comment number 474.

    463.Tony Fisher

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


    Tony, justice doesn't work like that.

    The same logic was equally used by nazis, to excuse their murder of minorities.

  • rate this

    Comment number 473.

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

    suppose a labour government borrowing trillions to keep people happy, then leaving it for another political party to deal with when they get voted out of power?

  • rate this

    Comment number 472.

    @David. I agree, it would be nice if you could make your own provision but if you try, there's no guarantee you get back what you put in let alone get an increase. Pension funds are only a scam to keep bankers in the manner to which they have become accustomed, or they are seen as a pot from which HMG can do a raid whenever it wants to. Even banknotes under the bed go out of date!

  • rate this

    Comment number 471.

    The government treats NI contributions and Public sector pension contributions as revenue. Private pensions are revenue for the finance companies.

    So my 31% of lifetime median income ( NI and pension) invested with compound interest, is about half a million pounds each. Even living off the capital, that gives me £25k a year for 20 years of retirement.

    We are robbed yet called spongers!

  • rate this

    Comment number 470.

    449. azured
    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.

    Personally I think your money would be better spent on a few economic lessons.

  • rate this

    Comment number 469.

    "Remember though, it's still these pensioners and benefit scroungers taking all your money!"

    That's all the government says here, that's the justification for taking your ability to live, not live well, to live at all

    :) While Mr Fraudster Carney over there gets his 800,000 pound a year living expenses out of YOUR tax money

    Take a serious look at this system the evil isn't in pensioners or poor

  • rate this

    Comment number 468.

    The government will be forced to announce it is bankrupt, probably within the next 5 years. Before that happens the government will probably do what it can to raid whatever it can for money (private pensions, bank accounts, etc.), then it will be forced to reevaluate current expenditure with state pensions, public pensions & benefits which are all funded on current taxes. Now is just the start!

  • rate this

    Comment number 467.

    There seems to be 2 choices available now

    1, people rise up and form a new political force
    2, leave,find a better country than this one (Germany, Japan maybe Canada im not too sure)

    maybe 3 but you just get condemned and criticised for the third as you are not allowed to defend your rights any more.

    3, RIOT

  • rate this

    Comment number 466.


    Matters CAN ONLY go from bad to worse if the idiots at the BANK OF ENGLAND - MARK CARNEY - do not raise INTEREST RATES NOW. Their whole strategy is to destroy the saving habit & if they continue with it they will destroy the whole pension industry plus nobody will save at all for a pension or anything.

    We need cheaper houses - not bigger loans!

    We need to make it worthwhile saving!

  • rate this

    Comment number 465.

    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."

    The average baby-boomer is 58 and hasn't even retired yet.

    As a baby-boomer I'm disapointed at my taxes wasted on your education.


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