Within the last year there have been many changes to pensions, public and private, but the biggest hit to date has been the new state flat rate pension which is currently under fire. Experts are stating that the average worker who could have expected a full pension upon retirement will now get a smaller amount.
Under the new rules, those who are ‘non-means’ will benefit by £140 but workers who spent their entire lives paying in the full contribution will suffer the consequences. If these workers who had spent many years already paying into the NI would have gotten a pension under the old rules, they would definitely have gotten a larger amount.
Now, Deborah Cooper, a pension consultant, claims that many workers will find their take home pay reduced because of the taxes but will not always get a larger pension from the state. In turn, they will need to start finding alternative ways to save for retirement. And, according to Cooper, this is just to stay in line with the pensions received by previous generations.
According to the Chancellor, this new flat rate pension will not be means tested as announced in his March Budget. He indeed confirmed that a single tier pension will be introduced for pensioners in the future and it is estimated at present time to be approximately £140.
Other experts, such as Glyn Bradley state that this new system is an illusion and that benefits to some will necessarily need to be paid by others. Anyone who has previously paid into S2P would have netted more than the £140 per week flat rate. Payments from S2P would have been based on how much that particular worker paid into the NI and many people currently paying that amount will not reap the benefits of years of being taxed.