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21 August 2013updated 22 Oct 2020 3:55pm

Five questions answered on the TUC’s claims on pension changes

Will they make people worse off?

By Heidi Vella

The Trade Union Congress (TUC) today released a report stating that government plans to scrap the second pension in 2016 will result in people being worse off. We answer five questions on the TUC report.

According to the TUC, how will people be worse off once the single tier pension comes into affect?

The report says that by scrapping the second pension and introducing a single tier pension anyone who has a long work history is likely to be worse off buy £2,000 a year.

For example, the report claims 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.

If they retired in 2030 they would receive £1,500 a year less than under the current system.

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Someone retiring 10 years after that would be £2,000 a year worse off.

“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 second state pension was introduced 10 years ago to help those on low income. Today around 20 million Britons are currently part of the scheme.

What do the government say?

The government say the changes will make people better off.

“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) told the BBC.

What has the Work and Pensions Committee said about the planned changes? 

In April this year they said they supported the idea of a single tier system.

“It will mean more state pension for many people, particularly low-earners, in the short to medium term,” the MPs said.

They did, however, conclude that the government needs to explain it better to the public.

What have other analysts said?

An Institute for Fiscal Studies (IFS) report found that people born later than the mid-1980s would be worse off when the single-tier pension was introduced.

The report said low earners would be £1,000 a year poorer, while high earners would lose as much as £2,300 a year.

However, it concluded that on average, women would be about £270 a year better off and men would be £81 better off.

What are the details of the new state single tier pension?

It will be introduced in 2016 and paid at a flat rate worth £144 a week. A person will need 35 years of contributions.

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