24th June 2010

New research from the House of Commons library reveals 10 million pensioners will get an average £100 cut in their pensions as a result of Budget plans.

Yvette Cooper said;

“The hidden truth behind the Tory Liberal plans for pensioners is that they are cutting the state second pension, watering down private pensions, and cutting £8,000 from men in their fifties close to retirement.

“Each day we learn more about just how unfair this Budget is. George Osborne told us that he would provide “lasting help for pensioners” and boasted “With this coalition Government pensioners will have the income to live with dignity in retirement”.

“But the small print shows they are actually cutting the state second pension by more than £100 a year which will particularly hit low paid women.. Pensioners won’t get any increase in their tax allowance, they won’t get any extra increase in their state pension next year and they will have to pay hundreds of pounds more in VAT from January. The Budget is a real con for pensioners who are going to be among the worst hit in the country.”


State Second Pension

• 10.2 million people get the state second pension, including 6.1 million women. It particularly provides for those in low paid work who do not have occupational pensions.
• The average state second pension is £36 a week (ONS Pension trends Chapter 5, House of Commons Library)
• The Budget announced that the additional state pension will in future be increased by CPI rather than RPI. This means that by 2015 the state second pension will on average be £2.20 a week and £114 a year lower. (Source: Red Book page 34, para 1.107, House of Commons Library.)

On increasing the state pension age in 2016:

• Labour had legislated to increase the state pension based on the Turner Commission report and the consensus built up around it’s recommendations.
• Changing the state pension age in 2016 means someone in their late fifties will lose a year of their basic state pension and additional state pension. The basic state pension is worth around £5,000 a year (source DirectGov) and the average additional pension for men is around £3,000 a year. (Source: (ONS Pension trends Chapter 5, House of Commons Library)
• Nearly 3 million people over 50 but below pension age are already not working. (2, 358, 000 people between 50 and state pension age are economically inactive; 380, 000 are unemployed. Source: Labour Force Survey June 2010). People who have either been made redundant or chosen to take early retirement already will be living on their savings and will find much more difficult to adjust their financial plans or find work.

On tax and the state pension:

• Pensioners will see no extra increase in their basic state pension in 2011/12 as a result of restoring the link to earnings because earnings are lower than prices this year. (Red Book)
• Pensioners will not see any increase in their tax allowance.
• Pensioners will face up to £500 a year extra VAT from January.

On auto-enrolment

• Auto enrolment was due to begin in 2012 alongside NEST – a new government established low cost pension savings scheme for low paid workers who would not be provided for in the private market.
• The review is looking at whether to cut the number of people covered by auto-enrolment or to reduce the required level of contributions.

On the state pension age, Yvette Cooper said;

 “This will hit heavily people in their late fifties who will now be forced to rip up their retirement plans and stand to lose around £8,000 as a result. As we are living longer, of course we will need to work for longer and the rules already mean people in their thirties and forties will need to work beyond 65.

But it is deeply unfair on those who are close to retirement to suddenly move the goal posts when they will find it much harder to change their financial and retirement plans.”


Liberal Democrats betraying pensioners.
 
Steve Webb Hansard:  9th March, commenting on Conservative plans to increase the state pension age in 2016:
 
”We need a long lead-in to such changes… people will need plenty of warning of any rise in state pension ages.”
 
“Professor Nicholas Barr said, ‘you do not give people nasty, short run surprises, but phase in the change gradually.’ That is absolutely right, and is clearly not what the Conservatives did last October.”
 
“It seems perverse for a potential party of government to increase the gap – albeit temporarily – between male and female state pension ages…I doubt whether it is legal.”