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  • FIRST POST
    • Former MSE Helen
    • By Former MSE Helen 21st Aug 13, 9:52 AM
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    Former MSE Helen
    MSE News: State pension changes to make workers worse off, unions say
    • #1
    • 21st Aug 13, 9:52 AM
    MSE News: State pension changes to make workers worse off, unions say 21st Aug 13 at 9:52 AM
    "Workers on an average wage will be £29 a week worse off under reforms to the state pension, according to the TUC..."

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    State pension changes to make workers worse off, unions say




    Click reply below to discuss. If you havenít already, join the forum to reply. If you arenít sure how it all works, read our New to Forum? Intro Guide.

Page 1
    • SnowMan
    • By SnowMan 21st Aug 13, 10:46 AM
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    SnowMan
    • #2
    • 21st Aug 13, 10:46 AM
    • #2
    • 21st Aug 13, 10:46 AM
    In my view the flat single tier state pension is an excellent thing because of its simplicity and fairness, and I also believe is due to be set at about the right level.

    As the Institute for Fiscal Studies says here

    The reduction in generosity in the longer run will reduce the cost of the system as a whole and therefore help meet the costs placed on the public finances of an ageing population

    As a result these reforms will avoid the need for some other future policy to reduce spending or increase taxes that would also adversely affect these later cohorts
    When SERPS was introduced in 1978 it was set at too generous a level and had to be subsequently scaled back.

    I am not sure why the TUC want the same mistake to be made again.
    I came, I saw, I melted
    • dunstonh
    • By dunstonh 21st Aug 13, 11:11 AM
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    dunstonh
    • #3
    • 21st Aug 13, 11:11 AM
    • #3
    • 21st Aug 13, 11:11 AM
    ..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.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • N1AK
    • By N1AK 21st Aug 13, 11:36 AM
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    N1AK
    • #4
    • 21st Aug 13, 11:36 AM
    • #4
    • 21st Aug 13, 11:36 AM
    In my view the flat single tier state pension is an excellent thing because of its simplicity and fairness, and I also believe is due to be set at about the right level.

    I am not sure why the TUC want the same mistake to be made again.
    Originally posted by SnowMan
    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.

    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.

    I know the governments reason: Offering good pensions now buys votes and people don't generally think long term enough to vote against the government because they are decreasing a pension they won't get for 30+ years.
    Having a signature removed for mentioning the removal of a previous signature. Blackwhite bellyfeel double plus good...
  • OffGridLiving
    • #5
    • 21st Aug 13, 11:47 AM
    • #5
    • 21st Aug 13, 11:47 AM
    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.
    Originally posted by N1AK
    It would not be fair to reduce the income of those people who are not in a position to adjust. They made their retirement plans based on their state pension expectations and we'll do the same.

    I won't retire for another 25 years, and knowing that I'll have a reduced (or no) state pension means that I can either accept that or I can do something about it by building up my savings/investments. You can do the same. People who have already retired, or are very close to retiring, cannot.
    • dunstonh
    • By dunstonh 21st Aug 13, 11:49 AM
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    dunstonh
    • #6
    • 21st Aug 13, 11:49 AM
    • #6
    • 21st Aug 13, 11:49 AM
    I know the governments reason: Offering good pensions now buys votes and people don't generally think long term enough to vote against the government because they are decreasing a pension they won't get for 30+ years.
    That may be part of it but logically, a lot of the reasons for the difference are due to benefits already accrued under the old system. Having a transitional period is sensible and logical. If it happens to be politically beneficial as well then you cant blame them.

    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.
    How is fairer to take entitlement away from someone who has built up say 30 years NI record with basic, graduated, serps and S2P to pay someone else who has little or no record yet? In my eyes, the transitional period is the fairest way of doing it even though the cleanest method is put everyone on the same version straight away.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • SnowMan
    • By SnowMan 21st Aug 13, 12:16 PM
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    SnowMan
    • #7
    • 21st Aug 13, 12:16 PM
    • #7
    • 21st Aug 13, 12:16 PM
    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.
    Originally posted by N1AK
    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.
    Last edited by SnowMan; 21-08-2013 at 12:41 PM.
    I came, I saw, I melted
    • JezR
    • By JezR 21st Aug 13, 12:18 PM
    • 1,582 Posts
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    JezR
    • #8
    • 21st Aug 13, 12:18 PM
    • #8
    • 21st Aug 13, 12:18 PM
    One of the ultimate aims is to replace the need for having the pension credit system for those with a reasonably complete work record - so it seems sensible to place the value above that.

    Some other countries get along fine without any consideration of 'contributions', basing entitlement to a state pension instead on a number of years of residency (typically 5-10) leading up to retirement. If it had actually been operated as a contributory system as originally conceived with an investment fund there would have been more logic about it, but that was unaffordable when introduced as it wouldn't have been able to pay the much increased level of basic state pension in 1948 (26 shillings) to the existing pensioners.
    Last edited by JezR; 21-08-2013 at 12:23 PM.
  • Tancred
    • #9
    • 21st Aug 13, 12:50 PM
    • #9
    • 21st Aug 13, 12:50 PM
    "Workers on an average wage will be £29 a week worse off under reforms to the state pension, according to the TUC..."

    Read the full story:




    Click reply below to discuss. If you havenít already, join the forum to reply. If you arenít sure how it all works, read our New to Forum? Intro Guide.
    Originally posted by MSE Helen

    I have to say the unions are right on this. I'm going to lose £1,200 a year approximately, and it would have been a lot more if I had a perfect continuous working record. While the single tier pension is good in principle, £144 a week is woefully inadequate - it should have been more like £170 a week.
  • Tancred
    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.
    Originally posted by SnowMan
    Unaffordable? Rubbish. The government keeps pushing up the claimant age so that it will be 80 before long!!

    And other countries of similar wealth to the UK have much more generous state pensions.
    • Perelandra
    • By Perelandra 21st Aug 13, 1:04 PM
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    Perelandra
    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.
    • N1AK
    • By N1AK 21st Aug 13, 1:14 PM
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    N1AK
    The TUC are arguing for the single tier pension to be set initially at a much higher rate than £144pw.
    Originally posted by SnowMan
    The TUC are playing to their audience. I have little time for them but I appreciate the fact they've highlighted the inequality of the current proposal (even if I disagree with how to solve it).

    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.
    Originally posted by SnowMan
    I wasn't seriously suggesting an immediate change to a £130pw pension but, rather clumsily, highlighting that less could be given to current pensioners in order to take less from future ones.

    Another option could be to bring forwards plans to delay retirement and means test anyone under 70 who wants to claim the state pension. It'll never happen because pensioners wouldn't stomach it but it's a lot fairer than punishing 20 year olds for their grandparents inaction in the face of ballooning pension costs. Retirement ages should have begun increasing years ago and we're effectively rewarding them for doing nothing about it earlier.

    I agree with all the points you make about the way the transition is being worked and would happily support amendment to them as you suggest.[/QUOTE]
    Having a signature removed for mentioning the removal of a previous signature. Blackwhite bellyfeel double plus good...
    • N1AK
    • By N1AK 21st Aug 13, 1:19 PM
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    N1AK
    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.
    Originally posted by Perelandra
    You're absolutely right and that's a very well balanced and responsible view. Pension costs had to be controlled.

    What I take issue with is that younger people are having their pensions slashed to control costs while we improve pensions for those retiring sooner. Which is patently unfair and blatant political vote buying.
    Having a signature removed for mentioning the removal of a previous signature. Blackwhite bellyfeel double plus good...
  • Dunroamin
    Unaffordable? Rubbish. The government keeps pushing up the claimant age so that it will be 80 before long!!

    And other countries of similar wealth to the UK have much more generous state pensions.
    Originally posted by Tancred
    Other countries' pension schemes can appear more generous because the amounts paid have to cover everything, unlike in the UK where extra can be claimed for rent/mortgage/council tax.

    These sort of comparisons can be very difficult to make but there are precious few countries which pay a single pensioner over £300 pw, which would be perfectly possible in the UK, under both the new and the old scheme, for someone renting in the private sector.
  • OffGridLiving
    You're absolutely right and that's a very well balanced and responsible view. Pension costs had to be controlled.

    What I take issue with is that younger people are having their pensions slashed to control costs while we improve pensions for those retiring sooner. Which is patently unfair and blatant political vote buying.
    Originally posted by N1AK
    Some of the reasons why pension changes are phased in have been explained to you, another reason is that these changes are coming in because life expectancy is increasing. When we retire there will be will be a larger number of pensioners and they will be claiming pensions for longer.

    Therefore you might receive a smaller amount each week than a current pensioner, but you will probably be in receipt of that pension for longer, so the pension received over the duration of retirement will be the same. Swings and roundabouts.
    • consumers_revenge
    • By consumers_revenge 21st Aug 13, 5:44 PM
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    consumers_revenge
    cant they just print more money....

    seems to work when they want to bail out banks and the rubbish economy!
    • MacMickster
    • By MacMickster 21st Aug 13, 6:49 PM
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    MacMickster
    Other countries' pension schemes can appear more generous because the amounts paid have to cover everything, unlike in the UK where extra can be claimed for rent/mortgage/council tax.

    .
    Originally posted by Dunroamin
    The countries with better state pensions also tend to have higher tax rates. Many are also having to make similar changes as they discover that their schemes are unsustainable.

    I have serious doubts that the current proposals for the single tier pension will last a decade before they are again changed to the detriment of future pensioners.
    • dawyldthing
    • By dawyldthing 21st Aug 13, 10:29 PM
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    dawyldthing
    The system as it is is unaffordable. This is going to be controversial and i've said this before but for some pensioners by the time they have there pension, council tax paid, possible housing benefit paid, attendance allowance if they are allowed it, winter fuel allowance, grants for different things like heating or boiler grants and others and the bus pass a lot of them are receiving a lot more than people earning minimum wage.

    By the time my generation retire there will be no pensions as the mass of people working can't sustain the increasing elderly population either unless the amount is lowered. Something has to give way and there will be someone down the line that isn't happy, but we don't have an infinate amount of money and everything has to be paid somewhere. I don't disagree that people have paid into the pot for x amount of years and so should be allowed some back but if it is unsustainable then something needs to give. I do think the universal credit if pushed through for everything eventually will work as it will bring things into proportion rather than as it is at the moment.
    to the lil one
    • N1AK
    • By N1AK 22nd Aug 13, 8:45 AM
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    N1AK
    Some of the reasons why pension changes are phased in have been explained to you, another reason is that these changes are coming in because life expectancy is increasing. When we retire there will be will be a larger number of pensioners and they will be claiming pensions for longer.
    Originally posted by OffGridLiving
    A woman retiring now retires at 60. A woman who is currently 40 (considerably older than me) will not retire until 68. Do you really think that life expectancy is going to increase by 8 years by then and that they'll be as able to enjoy retirement when they are 8 years older?

    I'm all for setting retirement such that each generation gets the same deal. But that isn't happening. People who have already retired or retire in the next few years are getting a considerably better deal than people retiring in future.

    You say that it balances out due to life expectancy and that's absolute nonsense that just shows you haven't researched it and are making statements up. But feel free to prove me wrong and provide some evidence to back your statement up.


    People can continue to 'explain' it away by saying it isn't fair to change the terms for people retiring soon but that's not a justification I accept. 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.
    Having a signature removed for mentioning the removal of a previous signature. Blackwhite bellyfeel double plus good...
    • dunstonh
    • By dunstonh 22nd Aug 13, 8:54 AM
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    dunstonh
    A woman retiring now retires at 60. A woman who is currently 40 (considerably older than me) will not retire until 68. Do you really think that life expectancy is going to increase by 8 years by then and that they'll be as able to enjoy retirement when they are 8 years older?
    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 am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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