Majority of pensioners ‘better off’ in shake-up

Ministers said an assessment of the proposals also showed that more than half of over-25s will receive more state pension income during retirement than they would under the current system.

Experts warned the Government on Monday, when it published a White Paper, that the vast majority of people would be worse off under the pensions shake-up.

The respected Institute of Fiscal Studies said the main effect in the long run will be to reduce pensions for the vast majority of people, while increasing rights for some particular groups, notably the self-employed.

But the Government said yesterday that in the 2020s, three-quarters of all new people retiring will receive a higher state pension and in the 2040s around two-thirds will be better off as a result of the introduction of a single-tier pension.

Pensions Minister Steve Webb said: “We’re doing the right thing by today’s workforce with our reforms. The majority of over-25s will get more, not less, income during their retirement under single-tier.”

The reforms, planned for April 2017 at the earliest, will particularly benefit women taking time out to bring up a family, low earners and the self-employed whose National Insurance contributions will count for the first time towards a full single-tier pension of £144 a week, said the Government.

Ministers added that without the reforms, spending on state pensions and pensioner benefits will rise from 6.9 per cent of GDP in 2012/13 to 8.5 per cent in 2060/61. The changes mean the increase will slow to reach 8.1 per cent in 2060.