But individuals who would have built up high S2P entitlements, those who may have been eligible for savings credit and those with less than 7 – 10 qualifying years will build up lower state pensions under the new system, says the PPI in its submission to the DWP Select Committee on the proposed single-tier pension.
The PPI says the picture of who wins and loses is made even more complicated because of the way benefits will be uprated. Some individuals who initially have lower state pension incomes under the proposed single-tier pension than under the current system, could have higher incomes than under the current system later in retirement. This is because all of the single-tier pension would be increased at least in line with average earnings, while in the current system only the Basic State Pension increases at least in line with average earnings. This makes it difficult to say who would definitively gain and who would definitively lose under the reforms, and to estimate how many gainers and losers there may be at any particular point in time.
The PPI also says the reduction in government spending on pensions by 2060 is greater than the fall from 8.5 to 8.1 per cent cited by the White Paper, as this figure does not reflect the impact of the ending of contracting-out.
The PPI says: “The DWP estimates that by 2060, under the proposed single-tier state pension system Government expenditure on state pensions and related benefits would be 8.1% of GDP, compared to 8.5% of GDP if the current system had remained in place. This implies that, on average, state pensions and related benefits will be less generous under the reformed system than under the current system.
“However, these figures reflect only direct expenditure on benefits, and do not take account of all of the changes being made to the system. In particular the figures do not take account of the impact of the ending of contracting-out, which will also reduce the amount of pensioner income derived from pensions paid for by the state.”