April 6 is set to be a disastrous day in the history of the state pension as millions of future pensioners find out the government has short-changed them, and millions of existing pensioners see their pensions rise by less each year as a result of unfair indexation arrangements.
The claim comes from Britain’s biggest pensioner organisation, the National Pensioners Convention (NPC), based on official Department for Work and Pensions’ figures that show:
– Less than half those reaching State Pensions Age (SPA) shortly after 2016 will earn full single tier pension of £155 per week
– Most people will lose out over the long term with less scope to build up a more generous state pension due to a cap of 35 years on accruing this benefit
– For those that have been contracted out, there are two groups who will lose out:
- Lower earners currently receive a state pension top up. From April they’ll pay higher National Insurance Contributions, seeing an equivalent reduction in take home pay, but build up less state pension each year
- Other losers include those whose starting amount on 6 April 2016 is less than £155 a week and who don’t have enough years left between now and SPA to make up the difference
The NPC claims the new state pension is not flat-rate – because not everyone will receive it:
– The £155.65 a week figure is actually less than the old system would have given someone with 35 years’ worth of National Insurance contributions
– Hundreds of thousands of mainly women who were relying on getting a state pension based on their spouse’s contributions will no longer be eligible
– The old state pension will rise by less than the new scheme, resulting in a two-tier pension system which disadvantages existing pensioners
Dot Gibson, NPC general secretary said: “The new state pension is absolutely riddled with complexity, confusion and essentially cost cutting. By 2060, the state will be spending less on state pensions as a percentage of GDP than if we’d kept the old system. The architect of the new state pension, former minister Steve Webb admitted that he over simplified the system in order to make it more acceptable to the public.
He certainly didn’t say that most of them would be worse off. The UK already has one of the least adequate state pensions in the developed world, ranked 32nd out of 34 OECD countries and now it’s going to get worse. The real aim behind this new system is to save money and to rely on the private pensions industry to fill the savings gap – but we all know that is a total fantasy. Our state pension system needs to be improved but this reform is taking us in the wrong direction.”