Future pensioners 'to get £29 less'

PensionerWorkers on an average wage will be £29 a week worse off under reforms to the state pension, according to a new study.

Research by the TUC found that anyone with a long work history will lose out under the single tier pension, which comes into effect in 2016, when the second state pension will be abolished.

Around 20 million workers, mainly employed in private firms, are currently contracted into the state second pension, which was introduced in 2003 to help low earners.

The union organisation said low earners in their 30s will get around £30 a week less than they would under the current arrangements.

Losses will increase over time, with an average earner retiring in the late 2040s set to be around £40 a week worse off, said the report.

The TUC added that it supported the single tier pension in principle but believed that the initial rate of £144 a week was far too low.

General Secretary Frances O'Grady said: "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, s etting 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."

A Department for Work and Pensions spokesman said: "Most people retiring by 2040 will be better off over the course of their retirement with the new state pension than under the current system. The flat rate will provide a fair base, set above the basic level of means test, helping people to know how much they need to save for the kind of retirement they want.

"With millions not saving enough for retirement and only one in three private sector employees having a pension at all, the Government is undertaking the biggest reform to pensions in generations. The reforms have, in less than a year, seen 1.4 million people automatically enrolled into a workplace pension."

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