Twenty million people will lose out from the introduction of a new flat-rate state pension with the burden falling most heavily on low-paid private sector workers, according to analysis by leading pension consultants, Hymans Robertson. It appears to undermine government claims that the reforms will create a fairer, as well as a simpler, system. The company also warns that the policy could have wider and graver repercussions for government than its attempts to slash credits for working people.
Chris Noon, a partner at Hymans Robertson, told the Observer that research had revealed that while there would be winners among middle-to-higher earners from this April, the costs of these rises would fall on lower earners in the form of lower pensions in years to come for about 20 million people. “Within the private sector, it’s the low paid – those earning less than around £15,000 – that will be hit hardest. Under the new rules, this population will be significantly affected.
For example, for someone earning around £15,000 with a working life of 20 years, they will be looking at a drop of around £1,200 per annum. If that same person worked for 50 years they will be looking at £2,500 less per annum in state pension than they would have been entitled to under the old system.”
Noon said more people would be affected than by cuts to tax credits. “With tax credits we’re seeing around three million people lose out, with a £4bn saving for the Treasury. With state pension changes, we’re seeing 20 million people lose, with an £8bn saving for the government. This is a much bigger issue affecting larger swaths of the population – and again, it impacts the lower paid. The only difference is tax credits affect individual’s incomes here and now, whereas state pension changes will hit them in the future.”