MSE News: State pension changes to make workers worse off, unions say

..yet the true TUC supply no data to support their view.

However, I suspect what they really mean is that their membership could end up worse off as the bulk will be in contracted out final salary schemes. Whereas most of the population are not in such schemes.

N1AK wrote: »

The TUC are highlighting that the government's pension policy is basically to give pensioners now a better deal while giving pensioners in future a worse one.

You can argue that the policy makes sense, but I think it's a good thing that someone is highlighting it so that people are informed.

The TUC are arguing for the single tier pension to be set initially at a much higher rate than £144pw.

A consequence of this would be that the state pension would become unaffordable and arguably have to be scaled back in the future for later cohorts. And later cohorts would then have to pay for the higher unaffordable single tier pension for earlier cohorts retiring soon after single tier introduction. So the later cohorts would lose out yet further.

So the TUC basically want to give prospective pensioners in the immediate future an even better deal (than the government plan) while giving pensioners in the distant future an even worse one.

Why not set the single rate to £130 now and used the money saved to make up some of the difference for future pensioners? That would also help control costs but would do so in a way that was fairer.

Which is the opposite of what the TUC are arguing for.

If it was set at £130pw that would mean that it would be set at a level lower than the current guaranteed pension credit level, the minimum that a single person can be expected to live on, and so expecting people to live on less than that would not be right in my view. So it would also necessitate the retention of a means tested top-up to state pension.

The transitional arrangements are one of the reasons why earlier cohorts do well (which is arguably itself due to state pensions accruing at an unaffordable rate in the past). There is not a lot that can be done about that unless you take away state pension that people have already accrued.

Except that what I think is wrong in the transitional arrangements is to allow those who have been contracted-out and are (say) 10 years from SPA to keep their basic state pension and additional pots or pension obtained through contracting-out and then to accrue a further £37pw of additional pension (= 144 -107). Effectively they are being paid additional pension twice which is ridiculously unfair (I say that as someone who gains from this). This anomaly could be changed very easily without adding any material complexity.

Relinking (a sustainable) single tier state pension to earnings rather than price inflation (assuming that link isn't broken again) also helps later cohorts rather than linking a single tier state pension to prices.

I'm one of the losers under this scheme- as per the article, I'll certainly end up with a smaller state pension under the new system than I would have done under the old system (unless I'm unemployed for the rest of my working years!). Materially so (I think I would hav ebeen on-track for a £186/week pension).

BUT- I do believe that the old pension scheme will become unnaffordable in the long term, and so I would prefer reforms to the system to happen earlier rather than later. I would expect people on average will be worse off under any reform system, as the money needs to be cut somewhere.