Government Must Come Clean On Secret Pension Rip Off

30.07.03

Changes could cost pensioners thousands

The Government must come clean about its planned pension reforms which it claims will cost the typical pensioner at least £6,500 when in fact the real cost could be much higher, the Liberal Democrats demanded today in a letter to Secretary of State, Andrew Smith.

Kingston and Surbiton's Liberal Democrat MP Edward Davey claimed 'this could be yet another blow to our pensioners'.

Government proposals reduce the obligation on employers to keep company pensions linked to inflation. Under present rules, employers are obliged to increase pensions each year by inflation or by 5%, whichever is the lower. But under new proposals, the obligation will only be to index by 2.5%.

As a result, in years when inflation exceeds 2.5%, pensioners will lose out. Over a 20 year retirement, the Government's own estimate is that this rule change will cost the typical pensioner £6,517.

But the true figure may be much higher than this. The Government's figures are based on the average pensioner having a £68 a week company pension. The typical newly retired pensioner has a company pension of around £98 - about 45% higher than the Government has assumed. As a result, company pensioners could lose an average of over £9,000 from the changes.

Edward Davey commented:

"Many people in Kingston and Surbiton could lose thousands through this pensions change. Its no use ministers dismissing it as "technical" when their own figures of the possible losses were so badly out. Pensioners have a right to know exactly how they could be affected. The Government must revise their estimates and make them available to pensioner groups.

"It is unacceptable that retired people could face a year-on-year cut in their living standards throughout their retirement. The Government must come clean about the effects of this policy and should think again. This is yet another example of the Government's appalling treatment of our pensioners'.