Pension Reform Update - Will You Miss Out?

A Pension reform update published in the Daily Mail 21 May 2014 has revealed that millions of older workers WON'T get the £155 new state pension they were expecting.

When I normally write articles like this I try to be impartial and just give you the facts as you need them.  Today however my emotions are running high at the injustice of what I've read in this article and I'm sure you'll feel the same.

It's bad enough that all current pensioners will not qualify for the new flat rate pension due to be introduced in 2016 and I know from the Pension Debate comments  that many of you feel very strongly about this.  But this pension reform update article is saying that as many as 4 out of 5 future pensioners who thought they would qualify will not.

I'm not going to pretend that I understand why this should be but I find this article incredibly alarming as it will dash the hopes and plans again of those who are within two years of retirement resulting in no time to make up the short falls.

Apparently it's all in the small print and sounds to me as if the new pension is a complete con.

Let's remind ourselves of the key points of the reform

  • A single, flat rate state pension payment of £155
  • An end to different Basic and Additional State Pensions, and contracting out of defined benefit pension schemes.
  • Savings credit abolished.
  • 35 qualifying years to receive the full amount with over 80% of new pensioners achieving this by the 2040s.
  • A minimum number of qualifying years (up to 10 years) to get any single tier.
  • Self employed people brought fully into the state pension for the first time.
  • All state pension rights accrued under the old system will be recognised, so nobody will lose out on any pension they have earned.



What the pension reform update reveals!

The problems seem to arise for anyone who was a member of a final salary company pension that was allowed to  contract out of the second state pension SERPS.

Because these pensions were so generous the Government decided they would not need any additional benefits such as the second state pension and they were allowed reduced payments for National Insurance.

Although many of these have now been phased out and replaced by money purchase schemes many employees may at some point in their career have been a member of a final salary scheme.

Now the Government has decided that because they've paid lower contributions they should lose some of the new state pension.


How can they justify this?

And this is not the end of the nasty surprises.

The Government is also ending a National Insurance rebate — worth 3.4 per cent — for employers who ran final salary pension schemes. 

In return, these schemes will be allowed to cut benefits or increase employee contributions without consulting their trustees.  This means that employees in these schemes will see their National Insurance increase by an average £23 per week in 2016 as they start to pay the full 12 per cent rate.

It will come as no surprise that Public sector employees will pay more National Insurance, but will be protected from changes to their pensions for 25 years under a deal struck with the Government.

One rule for them and one for the rest of us!


When the Daily Mail questioned the Department for Work and Pensions about how the flat rate pension would be implemented they confirmed that some workers will be denied the full £155 a week payment.

In a statement, the DWPS says: ‘It is therefore possible that someone might have 35 qualifying years  when the new state pension is implemented and not receive the full single-tier amount.

If this is the case then we really do need to keep lobbying our MP's.  It seems to me and I admit I'm no expert that the finer detail of the proposed pension hasn't been thought through and if as many as 4 out 5 older workers are going to miss out then the new state pension reform is not worth the paper it's written on.

If you thought you were going to qualify for the new flat rate pension you need to read the pension reform update article in the  Daily Mail  Why Millions WON'T get the £155 new state pension they were expecting.


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