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

xylophone

. People retiring now have had 40+ years to deal with the pension shortfall and didn't; bringing in means testing wouldn't lead to them freezing to death and would avoid rewarding them for their failure.

You haven't forgotten that people retiring now have paid their
contributions for well over 40 years in many cases?

Are you saying that those eligible for state pension have failed? In what way? Did they not do as required by the government in respect of NI and other taxes?

People already retired and those about to retire do and will suffer from the fact that RPI indexation is no longer used for the BSP or the ASP for which they paid higher NI contributions.

Even those who were contracted out are likely to have expected RPI indexation on the additional state pension that relates to their GMP and don't and won't get it.

Those same pensioners may well have saved in the hope of supplementing their pension through interest on their savings - such interest is now well below even CPI inflation.

Many pensioners still pay tax on their pensions.

wouldn't lead to them freezing to death

but might lead to a poorer quality retirement?

JezR

Increases applied to additional state pensions have been erratic over the years. Governments in the past have concentrated on the headline basic state pension increase in Budgets etc, often without making it clear that it is the basic pension only that is being referred to. Details of a lesser or even no increase at all on additional pensions was buried away in the Finance Bill or treasury statements. The last Government was particularly sneaky about this. I don't recall the TUC making this point in the past, but maybe they did.

jamesd

The TUC are correct. As that Institute For Fiscal Studies press release Snowman referenced earlier says:

"For later cohorts - in particular those born after the mid-1980s - the reforms represent a reduction in state pension income for almost everyone ... As an example, someone who was born in 1986 who spends 35 years as a low earner would receive nearly £1,000 per year less under the proposed new system than under the current system"

The flat rate system is a large cut to the pensions of PAYE employees and transfers pension money in the pension budget pot away to replace means tested benefit money paid out from a different budget pot to those who have not paid much in the way of their own contributions.

Auto-enrolment is needed for employees to replace the money that is being cut from the state pensions. But it's not being explained that it's to replace the cut to people's state pensions, which is about all the minimum levels will achieve.

A simple and correct short form description of this change is "the flat rate cut to pensions for employees" because that is what it is.

Or in political terms instead: "we're going to give away money to those with limited contribution histories who retire soon to try to buy ourselves a win in the next election, while hoping that nobody realises that it's the next generations who are going to pay the bill". It's political cross-generation warfare to buy votes today.

There really is an increased cost to the following generations if the current system was kept. That's because the boomer generation is bigger than the following ones. The solution to that isn't to take more money from the pensions of the following generations, it's to more rapidly adjust the pension entitlements of the boomer generation to keep them affordable. Encouraging immigration would also help, by making the tax payer base larger along with not having to pay the education costs of the new workers.

But guess what? Fixing the problem by reducing pensions of those who are highly likely to vote and encouraging immigration are not vote winners. Giving away money and cutting pensions for those who who are younger and don't pay as much attention to them is much easier politically. So that's what the current government is doing, skipping the hard part of the task and taking the easy way.

Itismehonest

AFAIK the thinking is that younger workers have many more years to alter their strategy & rethink their pension situation.
Those closer to retirement obviously have less time & possibility to do so.
Many of those that have already retired planned for a future when their £xxx were worth considerably more & went much further than is the case now.
I've an additional 6 years before I reach pension age & earned £18pw when I first started working in my teens. Anything put away toward a pension back then is less than peanuts now.
Each generation gets a nasty shock when they realise how the cost of living has risen (&, therefore, the buying power of their pension dropped) by the time they cash in their pot.

jamesd

I agree that those who are closer to retirement have less time to adjust. Now, why is this government giving away lots of money that people were not already entitled to under existing rules, by raising the state pensions for the self-employed and those with less good contribution records who are going to retire soon?

I'm probably one of those who will benefit from the proposal. I still think it's an unfair one that takes too much from following generations to give to those who are retiring soon.

JezR

It's the one aspect of the transition that has seemed somewhat odd - would have been more equitable to me to have considered self-employed people to date as having effectively 'contracted out'. They could then still build up new entitlement after the changes took effect.

elantan

dunstonh wrote: »

A woman who is 40 knew her state pension age was at least 65 before she started work. The only increase she has had is from 65 to 68.

Life expectancy has increased. Part of the problem though was catching up. Not just recent increases. When the state pension was introduced, the life expectancy for payment was just 2 years.

I'm 41 an when I started working at 16 I was told I would retire at 60, then it went to 65 now I'm 68, the goal posts keep moving for me making it hard to plan, I didn't contract out of SERPS and until recently my statements said I would get £168 a week pension ... Soon that will be the £144

Probably by the time I retire I won't be able to get 25% tax free lump sum either, it's really hard to make plans when things change as much as they have ... 3 changes so far in 25 years and I have 27 left to go ...

OffGridLiving

I'd support a flat rate pension if that was all pensioners received, and the pensions credits, free council tax, cold weather payments and all the other benefits were withdrawn. The pension should be set at a high enough level that everyone can house, feed and keep themselves warm without recourse to other benefits.

We need to get rid of the cradle to grave free ride that many seem to think is their right. If people don't put money away for retirement, then they should be on the breadline. If they do put money away, then they shouldn't be penalised and end up worse off than those who didn't bother saving.

Trix3y

I am still amazed at some of the comments posted about people who have already retired and their so called 'freebies'. Agree with Xylophone.So for the record, current retired people have already paid into the pot for forty or more years(in my case forty four) they did not enjoy today's freebies ie working family tax credits,child tax credits and under the last government baby bonds. Their only payment from government for raising children was the family allowance,and this did not include the first child until the late 70's.I feel a lot of money was saved which is being spent now on families,plus new policy which could become law soon allowing parents earning £150,00.00 help towards childcare. Totally bonkers in my opinion. Additionally interest rates at historic low meaning lower mortgage payments so no fifteen percent as in the 1980's to contend with.However, for pensioners a disaster. Many who saved some for retirement,now find no interest on savings.This situation has existed since downturn and looks set to continue into the future. So how can retired people possibly have forseen this situation ? The state pension is one of the lowest in the developed world that is why assistance is given towards heating and council tax and the bus pass. retired people who qualify for this help are not 'living it up' but just surviving. Perhaps others would prefer it if we all quietly died so were not a drain on the state which is frequently quoted. I feel this constant swipe at retired people is both depressing and demeaning. Please stop to think that as already mentioned WE HAVE CONTRIBUTED

SkyeKnight

Trix3y wrote: »

...they did not enjoy today's freebies ie working family tax credits,child tax credits and under the last government baby bonds. Their only payment from government for raising children was the family allowance,and this did not include the first child until the late 70's.

Plus Child Tax Allowance - which was from the first child. Those on an above average income received considerably more per child than they do nowadays.