Stop moaning ... you’re better off!
As millions are angered to find they won’t get the full £151 new state pension, the minister comes out fighting
SAVERS who receive less than the new £151.25-a-week state pension will still be better off, the new Pensions Minister has declared.
In her first major newspaper interview since taking up her post, Baroness (Ros) Altmann fought back against critics who claim the new system is unfair.
She told Money Mail that those who complain about deductions to their payout simply do not understand how the old and new state pensions work.
She said that those affected had actually benefited hugely from generous tax breaks during their working career.
And her message to those who complain that they feel cheated is: ‘It’s not my fault.’
In an impassioned defence, Lady Altmann told us: ‘If I had been here for the past three years, I would have explained how the new state pension works so that people could see what we’re trying to do. But to be fair, it is very complicated.’
She said: ‘It’s my job to make these savers [who miss out on the full amount] see that they are ignoring the fact that they have paid lower National Insurance. They are ignoring the fact that this was used to provide them with another pension elsewhere.
‘And they are ignoring the case that under the new system they can continue building up more state pension.
‘They are ignoring the fact that the current system is not fit for purpose and has to change, and that the Government has been brave to tackle it.
‘you have got to make some decisions somewhere — you cannot give everyone everything. We are not going to make anyone who is in the current system worse off in the new one.’
Money Mail was invited to meet the minister following a string of revelations in which we exposed how just one-in-three savers will receive the full £151.25-a-week payout when it is introduced in April next year.
Workers have complained that they were misled about what they would receive when the new state pension was first unveiled by previous Pensions Minister, Lib Dem Steve Webb. He famously said that everyone who worked for 35 years would be able to claim the full amount.
But Money Mail revealed this was not the case.
Over the past month, hundreds of savers have been angered after discovering their state pension will be far lower than they were promised.
Their rage has been directed at Lady Altmann, a former directorgeneral of Saga and consumer campaigner for women’s pensions. She was made a Tory peer and appointed Pensions Minister after the General Election in May.
She says it is now her job to make these savers see that they have not been made fools of.
She revealed that from November anyone approaching state pension age will be given a new, simple forecast of what they’ll get.
She has also begun an advertising campaign to explain the changes.
LADY ALTMANN said: ‘Currently, all the different classes of National Insurance people pay today count differently towards the state pension.
‘It’s bananas, and it shows why we had to get rid of this old system.’
The turmoil over the introduction of the new state pension focuses on deductions made to workers who paid lower National Insurance for some of their working lives.
Under the current system, everyone qualifies for the basic state pension of £115.95 a week provided they have 30 full years of National Insurance contributions.
They can also gain extra state pension depending on their earnings — this top-up payout is called the State Second Pension, also known as Serps.
There are also credits and benefits for lower earners.
Historically, workers have been able to decide if they want to accrue additional state pension.
Those who did not — known as contracting out — were allowed to pay lower National Insurance contributions. Instead of 12 pc, they paid 10.4 pc.
Companies also pay National Insurance for employees, and they, too, could save if the worker contracted out. The idea was that employers or the employee them- selves would use the saving to help build up extra private pension.
It was commonly done in finalsalary schemes, although in the Eighties and Nineties, millions of workers were encouraged by the Government to contract out and save into private pensions.
The existing state pension has been deemed too complicated and will be replaced with a system where everyone will eventually get a flat rate of £151.25 a week if they pay National Insurance for 35 years.
Lady Altmann said: ‘Once we get into the new system, you can forget
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the complexity of the past because we are moving forward.
‘When we are working out how much state pension you build up in the new system, we have got to take account of periods of contracting out, to recognise you have a private pension built up from the National Insurance you didn’t pay.
‘Otherwise someone who was contracted out would have two pensions, while those who paid higher National Insurance have only the one.’
Despite the apparent simplicity of the new system, merging the two state pensions will take decades. And, in the meantime, when some-one retires, they face a complicated equation based on how much pension they have built up in the old system and in the new.
They’ll get whichever figure gives the higher amount.
It has led to accusations of unfair-ness because many feel they are being cheated out of a pension they have earned.
For example, readers have told how they will only get the current basic state pension of £115.95 a week when they retire because under the new system their payout would be as little as £75 a week. When they have asked the Depart-ment for Work and Pensions for an explanation, its experts have been unable to help.
Those hit also claim they never knew they were being contracted out, or that it would affect their final state pension.
But Lady Altmann said that some-one contracted out earning £50,000 a year pays £478.92 a year less National Insurance than someone who was contracted in to the state second pension. Someone earning £25,000 saves £267.80. These savings were then paid in to a private pen-sion, or used by their employee to bolster a final-salary scheme.
The Government estimates that in many cases savers will have done far better in these schemes than if they had received the state second pension.
The minister adds: ‘You would not expect the pension system to say: “We know you didn’t give us all that money, but we are going to pay you that pension anyway.” ’
Lady Altmann has had a torrid start as a minister. She was appointed just as the Govern-ment’s Pensions Revolution erupted in chaos with complaints that millions could not get to their pensions.
AND last month it was revealed that Lady Altmann was still a registered member of the Labour party. At the heart of many complaints from Money Mail readers are that they have worked for more than the 35 years of National Insurance to qualify for the new state pension, but were still being penalised.
Lady Altmann says: ‘You can pick out unfairnesses. There is no doubt about it.’
But she adds: ‘The new pension is a fairer system, but no one was ever told it was a level playing field.
‘You will never have a level playing field. You have to make a decision about who you look after and how you look after them.
‘National Insurance is not just for your state pension. That is what people do not understand.’