UK Government to scrap derived benefits and lower 300000 elderly pensions

Nearly 300,000 elderly to receive lower pensions

Government admits plans to scrap “derived benefits” for spouses could see 190,000 women receiving £22 less a week in basic state pension between now and 2030

Steve Hawkes By Steve Hawkes, and Dan Hyde6:00AM GMT 14 Dec 2013Follow CommentsComments

Nearly 200,000 women could lose up to £1,100 a year in pension payouts under controversial Government plans to scrap top-ups for spouses or civil partners.

Documents released by the Department of Work and Pensions yesterday reveal that 190,000 women are likely to be affected by the change between now and 2030.

A further 100,000 men could also lose out, according to “simulations” run by civil servants.

Steve Webb, the pensions minister, revealed plans earlier this year to scrap the so-called derived benefit for spouses or civil partners who take career breaks but can boost their retirement income based on their partner’s National Insurance (NI) record.

The change is due to take effect from 2016 under plans to introduce a single-tier pension, where an individual’s basic pension will be based on their own NI contributions.

Steve Webb claimed the move was designed to stop spouses overseas, some of whom “have never set foot in the UK” or contributed to the economy from drawing the benefit.

But MPs have warned for months that the crackdown will snare tens of thousands of Britons, many who are already close to retirement age and relying on the top-up.

Dame Anne Begg, chair of the Work and Pensions Select Committee has for months called for “transitional” protection to safeguard the incomes these people, such as allowing those within ten years of retirement age to receive the top-up.

The Government documents released yesterday reveal that 40,000 men and 40,000 women will receive less state pension due to the withdrawl of derived benefit between 2016 and 2020.

A further 50,000 men and 90,000 women would see a hit to their retirement incomes in 2021-2025 followed by another 20,000 men nad 60,000 women between 2026 and 2030.

Between 2016 and 2030 the average effect on weekly incomes could be as much as £22 or £1,100 a year.

A DWP spokesman yesterday conceded the analysis revealed “some individuals” would receive less in the future than under the current pensions system but that it equated to just 3 per cent of pensioners.

He insisted the figures only built on estimates already released earlier this year and denied they were released on a Friday near Christmas to avoid further controversy. A Lords committee is due to debate pensions reform next week.

In a statement the DWP said: “We have always said that under the new single tier pension everyone will build up a state pension on their own right. This will put an end to the outdated notion that a men needs a pension while a woman needs a husband.”

Under the single tier pension, payments will be calculated based on an individual’s National Insurance record. To get the full £144 a week state pension, from 2016 people will have to have built up 35 years of qualifying NI contributions, against 30 currently. Years spent caring for children or sick relatives will count towards the record.

Under the current system, people with fewer than 18 years of National Insurance contributions whose spouse of partner is still alive can receive a top up of up to £66 a week.

The DWP figures risk triggering another row over the lack of protection for Britain’s savers and pensioners. Earlier this week Ministers were urged to stop insurers and brokers cheating eldery savers ouf of thousands of pounds when they retire.

The Daily Telegraph revealed expert had told the Financial Services Consumer Panel that the tactics use by insurers and middlemen selling the retirement policies was tantamount to “burglary”.

In the Lords on Thursday, Lord Newby, the deputy chief whipm, insisted the Government was “bearing down” on the sale of annuities. Lord Foulkes of Cumnock said: “Will the Minister join me in thanking The Daily Telegraph… for exposing this latest example of financial institutions cheating their customers.”

Earlier this summer a ComRes poll found that pensioners accept they should suffer benefit cuts along with the rest of the population. The youngest age group, 18 to 24 year-olds, came out most strongly in pensioners’ defence.

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