Cridland review plans would 'hit low paid workers the hardest'
Hiking the state pension age seven years earlier than planned would be a ‘strealth tax’ that would ‘hit low paid workers the hardest’.
That’s the view of the Trades Union Congress (TUC) following the release today of the Cridland review, commissioned by the government, which recommends brining forward plans to raise the pension age to 68.
State pensions are due to rise to 66 in 2020 and 67 between 2026 and 2028.
But the independent review, by former Confederation of British Industry (CBI) Director-General John Cridland, backs raising the pension age to 68 between 2037 and 2039, rather than between 2044 and 2046.
If adopted the change would affect people who are now under forty years of age.
The review also calls for scrapping the government’s ‘triple lock’ on pensions, which mean payments rise by inflation, earnings or 2.5 per cent, depending on which is higher.
Frances O’Grady, General Secretary of the TUC, said:
“Hiking up the state pension age will hit low paid workers the hardest. And it will punish those who become too sick to work.
Ending the triple lock while driving up state pension age would be a stealth cut to the future incomes of workers who are today in their 30s and 40s.”
She added:
“There is a 20 year gap in healthy life expectancy between the richest and poorest.
These changes risk only the wealthy enjoying a decent retirement.”
Cridland’s plans are meant to ensure ‘fairness’ between generations and save taxpayer money on pensions.
Adam Barnett is staff writer for Left Foot Forward. Follow him on Twitter @AdamBarnett13
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2 Responses to “TUC slams ‘stealth cuts’ to state pension in mooted age hike for under-40s”
NHSGP
The state pension is unfunded – no assets.
How much does the welfare state currently owe for the contributions people have made?
Why is it off the books?
That debt is just the amount that is transfered between generations.
Should the state hide the number or should it tell the young how much debt they inherit?
Christopher Smith
Regarding the comment by NHSGP, much as it troubles me to correct a medical professional (as from his pen-name I assume he is) but where do I start?
A private individual – a GP say – who wishes to draw a private pension after retirement is well advised to fund that pension, that is acquire title to assets – like private pension funds – that can generate an income when he or she no longer can. A company that pays out pensions to its staff can take a different view. They can treat the pensions as deferred remuneration, in effect wages that are paid not at the end of the month but at the end of a number of years, and pay them as they pay the rest of the wages – from current turnover. This is fine as long as the company is immortal, as few are. So it makes sense to supplement at least reliance on current turnover by building dedicated pension assets that go some way to meet the future liability. The example of BHS shows us what can happen if the wrong judgements are made.
The state is exactly like an immortal company. It can pay out pensions and other benefits, and pay for the NHS, education, defence etc. as long as it (or more likely its tame central bank) can issue currency and it can take some it back by taxation. Because the state is not going to go out of business, it hardly needs to build up a designated pile of assets which is there to ‘fund’ state pensions. If the state were to go out of business, then we’d probably have more pressing problems to worry about than our pension arrangements.
What about inter-generational fairness? The working population now support the retired, in the same way that they in future will be supported by the then working population. In any case, in a way there is a fund of assets that has been built up by the now retired that match the liability they represent. This is made up of schools, hospitals, infrastructure and trained and educated personnel – if these things could be properly valued, I doubt if there would be any actuarial concerns about state pension liabilities.
A state, or an economy, does not function like the individual households or businesses which it contains: no more than a bee colony functions in the same way as an individual bee.