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
    0

    Comment number 1124.

    The BBC are the establishment in journalism. If we are paying a fee for their services, which is what the British people are doing , I would expect them to devote more time on issues that directly affect the British voter. I resent paying the license fee now as the BBC are not reflecting Britain as it is now in any way at all. Well done BBC. Can I have a job ?

  • rate this
    0

    Comment number 1123.

    There's no money. something has to be done. Since we're talking about the establishment shafting the common man, how about an article on 10 percent of all criminal prosecutions being pursued by the BBC against licence dodgers. What's the cost to the taxpayer? I suppose we must find a way to pay these ridiculous public funded salaries.

  • rate this
    0

    Comment number 1122.

    I used to admire politicians when I was younger, I`m 63 now and I have now come to realise that no government or politician at this moment will help the poor, disadvantaged, disabled, homeless or anyone who goes from riches to rags. Apart from the elite we are all so totally vulnerable to poverty. Britain is unable to move forward without hanging on to history`s coat tails. We are a small island.

  • rate this
    0

    Comment number 1121.

    I worked hard and saved,even took out a Private pension afterurging of the benefits by Government.
    That nice Mr Brown put his greedy arms up to the elbows in the created pension pot and wham,my PP not a good idea.
    I diverted cash into a reputable company Equitable Life. You guessed it
    EL stole from me. Brown and co. knew but said nothing.
    Now retired! Any more "help" from govt? I`ll manage thanks

  • rate this
    0

    Comment number 1120.

    @1119 When did they do this? I've always known that todays state pensions are paid for by today's tax.

    Which is why people living longer is a issue as the ratio of peeps paying in to peeps getting paid becomes unworkable.

    Did you never wonder where the rises in pensions came from? not like someone whose been retired for 20 years is going to go back to work for a year to increase "their" pot

  • rate this
    +1

    Comment number 1119.

    Finally, the biggest "scam" since WWII is exposed.
    Successive governments of all shades perpetuated the idea that your NI contributions = your Pension. If the NI system had been set up as a "funded" system from the outset that could have been the case.
    As Autoenrolement gets everyone into a private personal pension over the next 50 years I would expect the rate of NI to fall!!!

  • rate this
    0

    Comment number 1118.

    463 Tony Fisher. Sorry Tony, but the mere phrase 'Lib Dem Minister' is guaranteed to get a negative response. And rightly so, given the Party's craven acquiescence to Tory ideology.After tuition fee lies and toadying to dismantlement of the NHS, I look forward to the so-called Party being consigned finally to the dustbin of history in 2015.

  • rate this
    +1

    Comment number 1117.

    thanx for telling us something we already knew.
    next you'll be telling us that dolphins are good swimmers.

  • rate this
    +2

    Comment number 1116.

    This government is a bunch of thieves full-stop. They are everything that decent honest law-abiding are not.
    They need to be rounded up and put on trial. Prison is not good enough.

  • rate this
    +1

    Comment number 1115.

    @1112. MH

    Why should they pay and not you? sell your car maybe be forced to take out a loan before they treat you in A&E?

  • rate this
    +2

    Comment number 1114.

    Stash it offshore - you've earned it you deserve it.....

  • rate this
    +4

    Comment number 1113.

    Can someone tell me how much some benefits person who has spent their entire working life on benefits, but blagged disability for a non-existent bad back will get? Don't those benefits wallers get the full NI contribution history, so they get the full 35 year whack in retirement, even though they've spent their entire, lazy, good for nothing, dolewalling, useleless, unproductive lives retired??...

  • rate this
    -3

    Comment number 1112.

    Maybe if the elderly who need care would pay for it and stop being scroungers then the rest of us would be better off in retirement. But i'm just joking I know the oldies will not sell their homes to pay for care if Jesus told them to.

  • rate this
    +4

    Comment number 1111.

    THE reason that pensions no longer 'work' is:

    That the Banks are bankrupt so the bank of England gives them free money - except it is not free it comes from the poor - you & me!

    For as long as the idiots of Thredneedle Street carry on with the economically insane policies savings & pensions will remain a sick joke.

    It is all about the choice to make money worthless especially savings &pensions.

  • rate this
    +1

    Comment number 1110.

    Keith @1104
    "any scheme"

    Depends on trust:

    … on the existence of an economy come the day
    … on the honouring of promises come the day
    … on the affordability of 'expectations'

    Precise promises - interest-based - are essentially fraudulent

    The only 'good promise', of equity, in agreed equal partnership

  • rate this
    -3

    Comment number 1109.

    Can one assume that those who claim not to be able to "afford" to save money don't spend any money on alcohol, cigarettes, lotteries, cars that do < 50 mpg, take-away meals, satellite TV, smartphones, & other "essentials".

  • rate this
    0

    Comment number 1108.

    Surprise?

    Signal given in 1989, Tories (right to fear fraudulent promises), 'allowing opt-out'

    Unspoken "I'll be back" to punish krill not taking their chances in the open water

    Right-left pension war continued with basking shark attack on pension-fund tax-relief

    No debate offered on securing pensions in national equity, equal partners

    No surprise, City as happy to earn from few as from many

  • rate this
    +1

    Comment number 1107.

    1104. Keith
    Same goes for state run schemes, keep your cash in your pockets and save it its safer.
    -
    I'd advise everybody to start looking at self invested pension plans (SIPPs). You can save money tax free and you can choose how your money is saved. It means taking responsibility for your savings but it cuts out the middle man feeding off your earnings.

  • rate this
    +2

    Comment number 1106.

    Only a mug would rely on the government during old age with an increasingly ageing population.

  • rate this
    +1

    Comment number 1105.

    1081 "People live longer so they must work longer and save more for their pensions.."

    How do we know for certain that we will live longer?
    There may be a war, or an epidemic, or a change of climate etc
    The average lifespan last century was reduced by two world wars.

 

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