UNISON warned today that many workers will still face poverty in retirement, despite the government’s claims that its proposed overhaul of the state pension system will improve pensions.
Millions of workers will also be clobbered with higher national insurance payments under the plans.
As the government today issues its long-awaited white paper on state pension reform, UNISON said that radical action was needed to halt the decline in pension provision in the UK, which stands to leave many people in financial misery in retirement.
Many employers that sponsor defined benefit pension schemes are facing an increase in national insurance contributions – which from April 2017 could be as high as 3.4%. The union said it feared this would have a knock-on effect that passed cuts onto employees, including the low paid.
Commenting on the paper, Karen Jennings, UNISON assistant general secretary said:
“These changes are being lauded as a good deal for pensioners, but it is worth remembering that £144 is still well below the poverty line, and more will need to be done to prevent workers finding themselves desperately poor in retirement.
“Who will be worse or better off following these changes will depend on salary growth, which remains stagnant for many workers, including millions in the public sector, and inflation, which continues to eat at the income of low earners.
“What is clear is that the real winner is likely to be the Treasury, who will receive a national insurance boost from pension scheme members and employers. This windfall must go back to employers otherwise there is a real risk that many will look to dumb down their current pension offerings even further.
“The government must not hide behind this as a ‘good news story’: It is their duty to guarantee that workers – and in particular the lowest paid – are not left worse off as a result of these proposals either now, or in their retirement.”
While the union welcomed the intention to simplify the confusing existing pensions system, it said it would be looking at the implications of the proposals in the white paper in detail, and would respond to the consultation in full.
The new flat-rate is designed to combine the basic state pension with the second state pension. The union pointed out that this will not affect those who already receive, or will begin receiving their state pension before the next Parliament.