Flat-Rate Pension 'Will Leave Many Worse Off'
Introducing a single flat-rate state pension will leave up to half of pensioners worse off by 2060, according to the Government's own figures.
Ministers say the coalition's plans to simplify the system will particularly help women, low earners and the self-employed.
It will see all new pensioners paid one rate above the means testing level, equal to around £144 in today's money, from April 2017.
Around 750,000 women will receive an average of £9-a-week extra, while millions of self-employed people will be brought fully into the state pension for the first time.
But the Government's own White Paper reveals more than half of people reaching state pension age after 2060 will be worse off.
When it is first introduced, around one in five pensioners will be better off, less than one in 10 worse off and others unaffected, according to the document.
But over time, the proportion losing out will rise rapidly and eventually many will be down by more than £2 each week.
The Institute for Fiscal Studies (IFS) said the plans implied a cut in pensions entitlements for most people in the long run.
Pensions Minister Steve Webb said high earners would be among those affected but insisted there were "far more winners".
"Our simple, single tier pension will provide a decent, solid foundation for new pensioners in an otherwise less certain world, ensuring it pays to save," he said.
He also said there would be no impact on public sector pension schemes despite unions claiming a hard-fought deal on the Local Government Scheme could be hit.
The Treasury will receive billions of pounds in extra National Insurance (NI) payments because people will have to work for 35 years rather than 30 to qualify for the full amount.
However, Downing Street rejected suggestions that the change was designed to save money or raise extra cash for the Treasury.
And David Cameron said: "We're going to have later retirement ages as we're all living longer. I think it's fair to ask people to work a bit longer as we are all living longer."
The IFS said the shake-up looked like a "welcome simplification" but warned there would be a "fairly complex pattern winners and losers in the short-term".
"The main effect in the long run will be to reduce pensions for the vast majority of people, while increasing rights for some particular groups, most notably the self-employed," a spokesman said.
"This will help a lot of women and a lot of lower paid workers who otherwise wouldn't get a decent state pension."
TUC General Secretary Frances O'Grady said: "Today's pensioners will be angry that they miss out on this reform and face continued threats to remove the winter fuel allowance and help with travel.
"The increases in the state pension age redistribute from poorer people with shorter life expectancies to the better-off who live longer."
But Joanne Segars, Chief Executive of the National Association of Pension Funds, said: "Today's announcement for a simpler, more generous state pension is a much-needed shake-up that will ultimately help millions of pensioners and savers.
"For the first time in a generation, people will know that it pays to save, and that whatever they put aside won't be eroded by means-testing when they retire."
Labour said 84,000 people in Wales were receiving a pension higher than the level proposed by the Government.
People entitled to such pensions stand to lose at least £10-a-week, said shadow Welsh secretary Owen Smith, adding:
"We will need look very carefully at these proposals as there is a risk that thousands of hard-working people across Wales who have paid contributions throughout their life will lose out," he said.
what do you think?
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The losers will be existing pensioners as the higher rate is for New pensioners creating a two tier system with older pensioners on the much lower rate, well thought out I D S.
Nigel if existing pensioners pay the extra NI payment back dated 30 or 40 years, it may be possible for them to receive the higher pension ? May not be advisable as most will be worse off after 2060
Most of the looser will be those who opted out when taking up a private / Company Pension. Something we have all been encouraged to do by governments of all colours. If this was a private company we would all be up for massive compensation -government can change the rules as they wish
More half truths and lies from IDS and his mates. I wish the government would stop trying to sell us half the story, give us the full facts or if that is not possible wait until you can.
One thing is cast iron certain - MP's wont be the losers
John Which politician in the last 40 years has told the truth ? They all only tell you what you want to hear, because most are stupid and fall for it
That maybe the case Michael, but as its this group that's in power at the moment I will save my observations and comments for them. We cant change the past, but we can shape the future.
John Politicians of all parties occupy Westminster, as we have seen today they are looking after their own interest above the electorate as a whole
And two of the main parties are in the driving seat and members of one of them have been caught out in silly lies (voting on a reality show) and serious serial lying like IDS has been guilty of. I am not really bothered about which party the person caught lying is from, what I do care about is once caught out it should bar you from representing the British public as an MP.
I remember when they asked us all to contract back in to SERPS for the enhanced pension a few years ago - I knew then that wheover was in power , they could NOT be trusted. At least Richard Turpin (can't use his known name - thanks Orange!) had the decency to wear a mask.
Trying spacing it out like this David - D i c k Turpin
Thanks GW - I always thought that the censors were humans - obviously not.
I've got the answer, Emmergrate to Afganistan get citezen ship ther then move back here and ask for aslyum here then you will get 3 times more.
No, quickest way to raise money is get a job in a bank.help bankrupt that bank using other peaples money, wait till christmas bonus, and then leave under a cloud with a big fat pay check.
"then you will get 3 times more" An Asylum Seeker gets £38.99 per week for as long as his / her claim is being heard. I'm not sure where you got your figures from, Nick.
It's interesting that a fact that can be easily checked gets voted down.
They don't want to know facts Mick - it's not what they deal in
By the time you retire the money raised will be well milked by our !HONEST??! Banking friends with nice big bonuses just for keeping your money .The Government will spend the rest on arms and pointless wars .ERR! Happy retirement.
Strange I D S hasnt come up with a reform of the MP,s own platinum plated pension scheme or come to that any reform (reform is the tory word for cuts) that effects them.
Trouble is with unsustainable levels of immigration more and more will draw out of the pot over a period of time. There won't be any money left soon. Plus people are living longer now too.
Actually, Tim, immigration is part of the plan to increase the pension pot. Immigrants annually contribute £3 billion more in taxes than they receive in benefits according to the Institute of Fiscal Studies.
Let me ask the doubters a question. The immigration rate in the UK (8.9%) is lower than in most developed countries: Quatar (75%), Kuwait (68%), Luxembourg 378.4%), Switzerland (22.8%), Australia (19.9%), Canada (18.8%), New Zealand (15.4%), Austria (14.9%), USA (12.8%), Germany (12.3%), Sweden (12.3%), Spain (10.8%), France (10.2%), Holland (10%) etc. Are we saying that all these countries encourage "unsustainable immigration" rates that will be harmful to their economy? I think not.
You can be sure that if the Tories do anything with pensions it's not for the benefit of the pensioners. The only pensions they wholeheartedly look after are the MPs , they look after their own pensions,and salaries, whatever the state of the economy is and no amount of criticism from the public makes a blind bit of difference. The Tories have broken the unions, split the country and broken communities, they will not be happy until we are back to the Victorian ways.
Labour were aware of the problem, held an enquire, did not like the results and put their head in the sand, to avoid loosing votes The current system could not be sustained, I will loose out as I opted out when I took up a private pension. Who do I sue as I have now been mis-sold my pension
this problem with pensions started in the 80s under thatcher
Did it Stephen so what about the labour party raiding the pension pot Brown and Blair all but took the lot to help pay for the mess we find are selves in today
I've state on here before every documentary i have seen says the banking crises was the fault of the governments of the 80s
For once I would agree with Stephen, the pension problem, state and all government workers has been escalating for decades as the average of death increased, All parties have ignored it as it was going to cost them the election These are the tough decision Governments are paid to make, most have ducked their responsabilty foto gain re election
Stephen The banking crisis is now the responsibility of William Ewart Gladstone a liberal democrat
Stephen you haven't answered Paul's question. Why did McBroon steal money from private pensions. Was it because socialists don't like the word 'private'?
its complicated old boy . no time must go bed bye bye
It's not complicated. Today's OAP pensions are paid by today's workers. People are living longer so the ratio of workers to old people is dwindling, so the unpalatable options are: 1. Increase workers' taxes / NI contributions 2. Increase the retirement age of workers 3. Import more workers (when the economy improves) 4. Increase the birth rate so that more workers are coming through the system 5. Introduce voluntary euthenasia As the Turner Report (2006) said: "There are no easy answers."
You can read a synopsis of the Turner Report(s) here: <a href="http://taen.org.uk/uploads/resources/Briefing_Turner_Guidance_Feb06.pdf" rel='nofollow'>http://taen.org.uk/uploads/resources/Briefing_Turner_Guidance_Feb06.pdf</a> It helps to understand the problems that any govt. (no matter what its colour) must at least try to address.
he gives his rich mates a big tax cut and tells the people to work longer. same old Tories
A couple of things, Stephen. Firstly, it's a coalition government, not a tory government. Secondly, the group of workers worst affected by the new pension scheme is the higher paid earners. They pay far more in NI and only get the same state pension.
And during the 13 years Labour spent messing up the country what was the top rate of tax? Answer that and tell me who was looking after the rich for those 13 years?
I can retire at 68, according to the latest pension statement. The only thing that goes up year after year is my in-service death payment. I think that if I'm expected to still be a patient teacher in 31 years, then that's what my man will get - loads of cash for him there!
Bet there wont be a single MP affected by it though! No MP should get more than the statutory state pension unless he/she pays for it out of their OWN pockets!
Wouldn't it be nice if they led by example, and slashed their own NON-CONTRIBUTORY, TAXPAYER-FUNDED, TWO-THIRDS FINAL SALARY PENSIONS??? And why do they reward themselves so exceptionally well? Let's see ... for lying just about every time their mouths open ... for ruining a once-prosperous country ... for making vast profits from the sale of TAXPAYER-FUNDED SECOND HOMES ... for fiddling their 'expenses' ... for paying thousands to relatives for doing nothing whilst supposedly employed as 'assistants' or 'researchers' ...
For some reason a number of people on here seem to blame Thatcher for the state pension problems, which is somewhat stupid; the problem began at inception, when a Labour administration set up a system which was obviously unsustainable in the long term. They did precisely what it is illegal for private pension providers to do ... expect current pensions to be funded by current workers. It doesn't work, and it can never work ... which is also true of the pyramid scam laughingly called 'The World Economy', as evidenced by the fact that it collapsed and the only people to come out with a profit were those who were running it, the individuals at the top of the financial institutions, none of whom have ever been prosecuted for fraud ... I wonder why???
A two tier pension system what a crazy idea from a crazy government
What are the two tiers, Alf? It's replacing a system with 3 tiers!!!! - the first state pension, the second state pension and pension credits. I don't understand your comment.
The basic state pension for someone retiring before 2017 will be about £37 lower than the basic pension for someone retiring after.Thats what alf means by two tier. The basic pension should be the same for all
Well Mike if you dont know what I mean by a two tier pension somebody on a £107 now say they get a 10% rise in the next 4 years means a pension of £117
Ok, I get what you're saying, Alf, but the new pension will gradually take over as a one tier system and replace the 3 tier system that exist currently.
So let me get this right then.............. You only need to pay in for 35yrs to qualify for a full pension. So why am I still paying in after 47yrs??? Also, when I reach 65yrs in 2014 I only qualify for the lower rate pension and automatically become a 2nd class pensioner despite having paid in for 50yrs??? Can anybody please tell me how this can be considered fair.......... please!!!
Fair --- maybe not ! but then " Deflation " always hurts. The poor more than the rich.
It's precisely because it's unfair that they're changing the system, rog.
There will always be some who fall between the two states. In this case it's you and it's absolutely not fair. There should be some interim plan for those in between.
If you think there will be a pension in 40 years time and that you will live to get it, you must be mad. We don't make anything and what we have we are giving it away cheaply. the Condems are borrowing more than Labour did. Third World here we come, hope someone gives us aid in the future!
"the condems are borrowing more than labour did" The debt has risen but the annual deficit between what goes in and out of the state's coffers is reducing. You can't reduce the legacy of an annual £175 billion deficit as easily as a lot of people may think. It will take several years to eliminate the deficit and then the debt will start to reduce.
yea india will probably
by inceasing the female penion age by seven years at say £ 100 per week she wlll lose £ 5200 per year for seven years=£36400 but she will gain £40 per week,£2080 per week, not bad deal is it
So women with children are being rewarded for staying at home to look after them. Once again the non English speaking resident will gain from this as they cannot get a job. British politicians and law makers certainly know how to waste our money in the name of 'fairness'. What about 'Justice' for the majority.
This aspect of the new pension is responding to one of the major recommendatioins of the Turner Report. I think that a lot of women will consider this to be very fair - and I do too.
After reading some of the posts here from aggrieved people in a similar position, I had a think. I also keep missing the bus: I had to take out a huge student loan to see me through Uni (I did work, too) and finished paying it off at 30. My sister, who studied later than me, had hers paid off through some scheme. It cost me thousands to then do my PGCE; she was rewarded for doing hers with a 4K golden hello on securing her first job. I bought a house in 2005 DURING THE BOOM! I moved my TRACKER mortgage just as the crash happened and have paid a rate far too high for years. Now my pension is shafted. While I am of course glad that some have benefited over the years, I do feel very unlucky. Grr!