Before we all get carried away and congratulate Iain Duncan Smith and the Tories for their magnanimity (flat-rate pension of £144 per week from 2017) in introducing an increased state pension, let’s not forget that £144 is only £1.30 more that than the current (2013) means-tested pension of £142 with pension credit (Duncan Smith’s flat-rate state pension branded a con-trick, 14 January). Let’s also remember that the pension-credit element of £142.70 was introduced by New Labour because it didn’t reintroduce (as it promised to do) the link to average wages rather than prices for the annual uprating of the basic state pension.
Furthermore, this magnificent £144 from 2017 is probably less than what the basic state pension would have been had not Margaret Thatcher’s Conservative party made the abolition of this link, to average wage increases, one of the first things that they did in 1980, shortly after getting elected. We currently have, expressed as a percentage of a country’s median average wage/salary, the second-lowest state pension in the EU. This in the incorrectly labelled fourth (or fifth) richest country in the world and the (so-called) second richest in the EU. Let’s not also forget that when the basic state pension, in its current format, was introduced in 1978, the NI contribution rate was 6% of relevant earnings between the lower and upper earnings limit. It is now 12%.
• I am due to receive my state pension in 2018, a year after the changes. Two months ago, in November, I obtained a state pension forecast from the government website and my forecast was a basic pension of £107.45 per week plus an additional state pension and graduated retirement benefit of £99.11 per week, making a total state pension of £206.56.
If the proposals go through my pension will be £62 less per week. This seems completely unjust as I have paid extra into the state pension all my working life. It is galling to read in the press that only a minority of “high earners” will lose out. I have always worked in a factory and during the 80s and 90s did regular overtime to support my wife and three children. The most I earned in one year was £33,000 on a basic salary of £20,000. Since 2006, I have been self-employed and not earned more than £10,000 per year. I have no private provision for my retirement and will rely completely on my state pension.
• One of the avowed aims of the proposed pension arrangements is to abolish means testing, which I applaud. But the way it is to be implemented hardly achieves that aim. Under the present system, someone like myself, who has 40 years’ worth of NI contributions, and has saved and made provision for retirement, is penalised compared to those who can receive £142 per week by not having done the same. The new system effectively retains means testing for those already retired and those who will retire between now and 2017. Which means someone aged 62 now could continue under present arrangements for 40 years!
My calculations are, assuming a 3% per annum rise in the RPI index, in 2017 my basic state pension would only amount to £125 and yet we are told the £144 quoted is at present-day values so would be even higher, thus the differential even greater. So my wife and I would be at least £60 per week (£260 per month) worse off than a similarly qualified couple who happen to retire after 2017. The inequities of this situation will be repeated many thousands of times and I am sure someone will be seeking redress in the European court once it becomes law. Of course, we may not be in Europe by then.
• While every fair-minded person would applaud some of our fellow citizens, such as some women, making some gains with the proposed arrangements, many will be gobsmacked by the planned changes. As they are described, they will create a two-tier pension rate when introduced. Anyone already drawing their retirement pension, based on the contributions they made throughout their life, in April 2017 will be paid (at today’s equivalent rates) £107.45. Their friend retiring the next day will receive an extra £36.55 for the rest of their life. That’s an additional 34%, an amount that, these days, takes a public-sector worker 34 years to achieve in pay rises. The Tories want to alienate everyone who has saved hard and planned to retire on their state pension, plus whatever else they have built up.
• What a novel definition the coalition government has for the word “everybody” – as in “everybody” will receive its proposed flat-rate pension of around £144 a week, except for Britain’s 11 million pensioners. This amounts to pension apartheid, since all those in or approaching retirement who have paid their taxes and NI over a working lifetime will in future be treated as second-class pensioners fobbed off with a shockingly smaller basic state pension than later retirees. Is it not presumptuous to the point of political suicide for Tories and Lib Dems to assume the 11 million will docilely vote in the 2015 general election to be branded as second-class citizens?
A fairer and more sensible version of the simplified pension would be to introduce it for older age groups – say, over 75s – and gradually widen its application to younger retirees at a pace the nation’s economy can safely afford.
New Malden, Surrey