Labour’s shadow pensions minister Nick Thomas Symonds has called on the government to come clean about those who stand to lose from the single-tier pension.
He said that it is clear that there are a number of groups who will lose out when the new system is introduced next April.
Mr Thomas Symonds also seized on the fact that the pension minister Baroness Ros Altmann had attacked actuaries Hymans Robertson for highlighting potential losers from the reforms before appearing to withdraw her criticism.
His party colleague and chairman of the Work and Pensions Committee Frank Field launched an official inquiry into the State Pension changes, after concerns were raised that many of those who will be affected do not know enough about the changes or exactly what they will mean for their pensions.
Earlier this week Hymans Robertson published analysis which spelled out the potential State Pension winners and losers, suggesting that less than half those reaching State Pensions Age shortly after 2016 will earn a full single tier pension of £155 per week.
Sue Waites, a partner at the consultancy, said that over the long-term, the majority will lose under the new State Pension. “Under the current regime, although basic state pension accrual is limited to 30 years, additional State Pension can be accrued over an entire working life (potentially up to 50 years), under the new system it will be capped at 35 years with no additional State Pension so there will be less scope to build up a more generous entitlement.”
Ms Altmann responded to this by stating: “This ‘research’ has been produced for the primary purpose of generating publicity for a private actuarial firm. It is misleading and represents irresponsible scaremongering.”
However, she has since apologised for the accusations of scaremongering, with Mr Thomas Symonds taking the opportunity to call the initial reaction “a serious mistake”, adding that Hymans Robertson had raised “entirely valid concerns about the prospect of the government’s new single-tier pensions disadvantaging many low income workers”.
Commenting on the inquiry, another Hymans partner Chris Noon said that while trying to simplify the State Pension was commendable, the changes have been rushed instead of being undertaken carefully in phases.
“This has thrown up anomalies where different groups of people are being treated unfairly. While there will be around 10m winners – including women who take career breaks and self-employed workers – the fact remains over double that number will lose out.”
Ms Altmann admitted that there is “so much misunderstanding of new State Pension”, but pointed out that contracted out people will do well, along with women and the self-employed.
“The new State Pension has mostly winners in early years, then after the 2030s the system is less generous in order to be sustainable with an ageing population.”
She added: “The new State Pension will be straightforward in future, but we have to get through to 2016 first”, adding that the complexity is with the old system, not the new one.
Jon Greer, pensions technical specialist at Old Mutual Wealth, commented: “The reaction to these changes from the public, which has mostly been one of confusion, make it clear that people do not understand, however I think this is a result of years of misunderstanding, not just around these most recent changes.
“These changes are immensely complicated and yet the methods used to communicate with the public feel like a bit of an after-thought,” he continued. “The new pensions minister Ros Altmann has a strong record on consumer engagement in the private sector, but engaging the electorate on state pension change will be extremely challenging.”
peter.walker@ft.com
