Pension reforms mean cash misery for millions
MILLIONS of workers face pensions misery when Government reforms wipe thousands of pounds a year off their retirement payments, research has found.
A move to simplify the state pension will leave those currently in their 30s worse off by up to £40 a week when they retire compared to those who stop working today, according to the study.
Campaigners want ministers to raise the new flat-rate payment and warned workers to start building their own pension pots.
The reforms, which come into effect in 2016, will scrap the contributions-related section of pensions and replace it with a £144-a-week payment for everyone.
The biggest gainers will be those who have spent long periods out of work, including women nearing retirement who raised children, and the self-employed.
But most of those currently in their 30s or younger earning between £10,000 and £26,000 will lose out. Pensions expert Dr Ros Altmann claimed the change was “absolutely the right idea” but admitted it would mean a tougher retirement for many.
She added: “My advice for anyone in their 30s now is, ‘Do not rely on a state pension to fund your retirement – you have got to find extra money for yourself’.
“The current system is unsustainable financially.”
Dr Altmann voiced her concerns in response to a TUC report published today showing that workers on an average wage will be £29 a week worse off from 2016. But the losses will increase over time to about £40 a week.
Twenty million workers are contracted into the contributions-related aspect of the state pension, which was introduced in 2003 to help low earners.
The TUC supports the move to abolish the pensions top-up but says the replacement flat-rate payment is “far too low”.
TUC general secretary Frances O’Grady added: “The Government should raise the single-tier pension rate and raise minimum contribution rates into workplace pensions.”