The TUC report shows that anyone with a long work history will lose out under the single tier pension.
The report finds that a worker on a median income of £26,000 a year and with a full employment record will lose out as soon as the new single tier pension is introduced. A median earner retiring in 2030 will be £29 per week or £1,508 a year worse off.
The losses will increase over time, warns the report, with a median earner retiring in the late 2040s set to be around £40 a week or £2,080 a year worse off than they would be under the current state pension arrangements.
According to the report, a low-paid worker earning £10,000 a year can expect to be £5-10 a week better off if they retire soon after the changes take place. However, people earning the same income now and who will to retire in a few decades time are likely to lose out. Someone earning £10,000 now but retiring in the 2040s will be between £18 and £32 a week worse off.
Low earners now in their late 30s will get around £30 a week less than they would get under the current arrangements. Those set to benefit from the single tier pension, such as low earners and carers, will only be at an advantage when the reforms first take place. In time, their retirement incomes will fall too.
The TUC research models what the projected retirement incomes of people currently contracted into the second state pension will be under the new single tier pension – which has been set at £144 a week in 2012/13 terms. The research includes various income bands, pension contribution levels and retirement dates.
For median earners with ten years of missing national insurance contributions – for example a woman who has taken a career break to have children – the potential income losses range from £3 to £27 per week, depending on when they retire.
With most workers expected to be auto-enrolled into a workplace pension by 2018, it is expected that private pension saving will plug the gap left by the scrapping of the second state pension.
However, the TUC research shows that in some cases even the combined total of the single tier pension and private pension saving will not be enough to match the level of pension received under the current system from the state pension alone.
A worker earning £10,000, with an 8 per cent total contribution rate to their pension and retiring in 2030 will have a private pension income of £3 a week – not enough to offset the £7 a week loss that they will experience in their state pension income. The same worker retiring in 2040 will receive a private pension income of £7 a week – £11 a week less than what they would have received under the current state pension system.
The report warns that because it will take time for auto-enrolment to make a significant contribution to people’s pension saving, it won’t be until 2032 that private sector workers on median salaries get more from a combination of their private and state pension than they would have got under the current arrangements.
The TUC says it supports the single tier pension in principle but believes that the initial rate of £144 a week is far too low.
TUC General Secretary Frances O’Grady says: “The state second pension was designed to give low and middle income earners a much-needed top up to the basic state pension.
“Scrapping it as part of the new single tier pension will mean that 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.
“While the government is right to move towards a simple, single state pension,
setting it at just £144 a week is far too low and will mean many future pensioners will be worse off.
“The government should raise the single tier pension rate, and look to raise minimum contribution rates into workplace pensions once auto-enrolment has had time to establish itself, so that fewer people lose out under the government’s pension reforms.”
The TUC report shows that anyone with a long work history will lose out under the single tier pension.
The report finds that a worker on a median income of £26,000 a year and with a full employment record will lose out as soon as the new single tier pension is introduced. A median earner retiring in 2030 will be £29 per week or £1,508 a year worse off.
The losses will increase over time, warns the report, with a median earner retiring in the late 2040s set to be around £40 a week or £2,080 a year worse off than they would be under the current state pension arrangements.
According to the report, a low-paid worker earning £10,000 a year can expect to be £5-10 a week better off if they retire soon after the changes take place. However, people earning the same income now and who will to retire in a few decades time are likely to lose out. Someone earning £10,000 now but retiring in the 2040s will be between £18 and £32 a week worse off.
Low earners now in their late 30s will get around £30 a week less than they would get under the current arrangements. Those set to benefit from the single tier pension, such as low earners and carers, will only be at an advantage when the reforms first take place. In time, their retirement incomes will fall too.
The TUC research models what the projected retirement incomes of people currently contracted into the second state pension will be under the new single tier pension – which has been set at £144 a week in 2012/13 terms. The research includes various income bands, pension contribution levels and retirement dates.
For median earners with ten years of missing national insurance contributions – for example a woman who has taken a career break to have children – the potential income losses range from £3 to £27 per week, depending on when they retire.
With most workers expected to be auto-enrolled into a workplace pension by 2018, it is expected that private pension saving will plug the gap left by the scrapping of the second state pension.
However, the TUC research shows that in some cases even the combined total of the single tier pension and private pension saving will not be enough to match the level of pension received under the current system from the state pension alone.
A worker earning £10,000, with an 8 per cent total contribution rate to their pension and retiring in 2030 will have a private pension income of £3 a week – not enough to offset the £7 a week loss that they will experience in their state pension income. The same worker retiring in 2040 will receive a private pension income of £7 a week – £11 a week less than what they would have received under the current state pension system.
The report warns that because it will take time for auto-enrolment to make a significant contribution to people’s pension saving, it won’t be until 2032 that private sector workers on median salaries get more from a combination of their private and state pension than they would have got under the current arrangements.
The TUC says it supports the single tier pension in principle but believes that the initial rate of £144 a week is far too low.
TUC General Secretary Frances O’Grady says: “The state second pension was designed to give low and middle income earners a much-needed top up to the basic state pension.
“Scrapping it as part of the new single tier pension will mean that 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.
“While the government is right to move towards a simple, single state pension,
setting it at just £144 a week is far too low and will mean many future pensioners will be worse off.
“The government should raise the single tier pension rate, and look to raise minimum contribution rates into workplace pensions once auto-enrolment has had time to establish itself, so that fewer people lose out under the government’s pension reforms.”
The TUC report shows that anyone with a long work history will lose out under the single tier pension.
The report finds that a worker on a median income of £26,000 a year and with a full employment record will lose out as soon as the new single tier pension is introduced. A median earner retiring in 2030 will be £29 per week or £1,508 a year worse off.
The losses will increase over time, warns the report, with a median earner retiring in the late 2040s set to be around £40 a week or £2,080 a year worse off than they would be under the current state pension arrangements.
According to the report, a low-paid worker earning £10,000 a year can expect to be £5-10 a week better off if they retire soon after the changes take place. However, people earning the same income now and who will to retire in a few decades time are likely to lose out. Someone earning £10,000 now but retiring in the 2040s will be between £18 and £32 a week worse off.
Low earners now in their late 30s will get around £30 a week less than they would get under the current arrangements. Those set to benefit from the single tier pension, such as low earners and carers, will only be at an advantage when the reforms first take place. In time, their retirement incomes will fall too.
The TUC research models what the projected retirement incomes of people currently contracted into the second state pension will be under the new single tier pension – which has been set at £144 a week in 2012/13 terms. The research includes various income bands, pension contribution levels and retirement dates.
For median earners with ten years of missing national insurance contributions – for example a woman who has taken a career break to have children – the potential income losses range from £3 to £27 per week, depending on when they retire.
With most workers expected to be auto-enrolled into a workplace pension by 2018, it is expected that private pension saving will plug the gap left by the scrapping of the second state pension.
However, the TUC research shows that in some cases even the combined total of the single tier pension and private pension saving will not be enough to match the level of pension received under the current system from the state pension alone.
A worker earning £10,000, with an 8 per cent total contribution rate to their pension and retiring in 2030 will have a private pension income of £3 a week – not enough to offset the £7 a week loss that they will experience in their state pension income. The same worker retiring in 2040 will receive a private pension income of £7 a week – £11 a week less than what they would have received under the current state pension system.
The report warns that because it will take time for auto-enrolment to make a significant contribution to people’s pension saving, it won’t be until 2032 that private sector workers on median salaries get more from a combination of their private and state pension than they would have got under the current arrangements.
The TUC says it supports the single tier pension in principle but believes that the initial rate of £144 a week is far too low.
TUC General Secretary Frances O’Grady says: “The state second pension was designed to give low and middle income earners a much-needed top up to the basic state pension.
“Scrapping it as part of the new single tier pension will mean that 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.
“While the government is right to move towards a simple, single state pension,
setting it at just £144 a week is far too low and will mean many future pensioners will be worse off.
“The government should raise the single tier pension rate, and look to raise minimum contribution rates into workplace pensions once auto-enrolment has had time to establish itself, so that fewer people lose out under the government’s pension reforms.”
The TUC report shows that anyone with a long work history will lose out under the single tier pension.
The report finds that a worker on a median income of £26,000 a year and with a full employment record will lose out as soon as the new single tier pension is introduced. A median earner retiring in 2030 will be £29 per week or £1,508 a year worse off.
The losses will increase over time, warns the report, with a median earner retiring in the late 2040s set to be around £40 a week or £2,080 a year worse off than they would be under the current state pension arrangements.
According to the report, a low-paid worker earning £10,000 a year can expect to be £5-10 a week better off if they retire soon after the changes take place. However, people earning the same income now and who will to retire in a few decades time are likely to lose out. Someone earning £10,000 now but retiring in the 2040s will be between £18 and £32 a week worse off.
Low earners now in their late 30s will get around £30 a week less than they would get under the current arrangements. Those set to benefit from the single tier pension, such as low earners and carers, will only be at an advantage when the reforms first take place. In time, their retirement incomes will fall too.
The TUC research models what the projected retirement incomes of people currently contracted into the second state pension will be under the new single tier pension – which has been set at £144 a week in 2012/13 terms. The research includes various income bands, pension contribution levels and retirement dates.
For median earners with ten years of missing national insurance contributions – for example a woman who has taken a career break to have children – the potential income losses range from £3 to £27 per week, depending on when they retire.
With most workers expected to be auto-enrolled into a workplace pension by 2018, it is expected that private pension saving will plug the gap left by the scrapping of the second state pension.
However, the TUC research shows that in some cases even the combined total of the single tier pension and private pension saving will not be enough to match the level of pension received under the current system from the state pension alone.
A worker earning £10,000, with an 8 per cent total contribution rate to their pension and retiring in 2030 will have a private pension income of £3 a week – not enough to offset the £7 a week loss that they will experience in their state pension income. The same worker retiring in 2040 will receive a private pension income of £7 a week – £11 a week less than what they would have received under the current state pension system.
The report warns that because it will take time for auto-enrolment to make a significant contribution to people’s pension saving, it won’t be until 2032 that private sector workers on median salaries get more from a combination of their private and state pension than they would have got under the current arrangements.
The TUC says it supports the single tier pension in principle but believes that the initial rate of £144 a week is far too low.
TUC General Secretary Frances O’Grady says: “The state second pension was designed to give low and middle income earners a much-needed top up to the basic state pension.
“Scrapping it as part of the new single tier pension will mean that 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.
“While the government is right to move towards a simple, single state pension,
setting it at just £144 a week is far too low and will mean many future pensioners will be worse off.
“The government should raise the single tier pension rate, and look to raise minimum contribution rates into workplace pensions once auto-enrolment has had time to establish itself, so that fewer people lose out under the government’s pension reforms.”
