The vast majority of people currently entitled to the state second pension will get less when they retire as a result of the scheme being replaced by the new single tier pension, TUC research warns.
The single tier flat rate state pension for all of £144 will take effect from 2017.
The TUC report shows that anyone with a long work history will lose out under the single tier pension. While high earners lose most, people on low to middle incomes (£10,000 to £26,000) could also lose significant amounts.
A worker on a median income of £26,000 a year and with a full employment record who retires in 2030 will be £29 a week (£1,508 a year) worse off. The losses will increase over time, warns the report, with a median earner retiring in the late 2040s set to be around £40 a week (£2,080 a year) worse off than they would be under the current state pension arrangements.
According to the report, a low-paid worker earning £10,000 a year can expect to be £5-£10 a week better off if they retire soon after the changes take place. However, someone earning £10,000 now but retiring in the 2040s will be between £18 and £32 a week worse off.
The state second pension was introduced in 2003 as a way to help low earners and carers get more from the state pension. Around 20 million people, the vast majority of whom are private sector workers, are contracted into the scheme.
TUC general secretary Frances O'Grady said: "While the government is right to move towards a simple, single state pension, setting it at just £144 a week is far too low and will mean many future pensioners will be worse off. The government should raise the single tier pension rate and look to raise minimum contribution rates into workplace pensions once auto-enrolment has had time to establish itself, so that fewer people lost out under the government’s pension reforms."
