A single-tier pension: what does it really mean? - The Institute For ...

Short-run effect on pensioner incomes
Table 4.3. Percentage of individuals entitled to more and less than the full
single-tier amount, under current and proposed systems – assuming no
contracting out
State pension entitlement
Current system (no contracting out)
Men Women All
£1 or more below £146.30 p.w. 9.0 61.4 25.3
Within £1 of £146.30 p.w. 0.8 2.1 1.2
£1 or more above £146.30 p.w.
Single-tier system (no contracting out)
90.2 36.5 73.5
£1 or more below £146.30 p.w. 4.9 32.9 13.6
Within £1 of £146.30 p.w. 5.0 30.5 12.9
£1 or more above £146.30 p.w. 90.2 36.5 73.5
Sample size 741 334 1,075
Source: Authors’ calculations using English Longitudinal Study of Ageing and National Insurance
administrative data.
who have private pension entitlements funded by rebates from (or lower
contributions to) the state to apply no reduction to their single-tier amount in
recognition of their years of contracting out. In fact, the transition arrangements
chosen, which allow those who have been contracted out in the past to work this
off, already treat this group more generously than otherwise-identical individuals
who have been contracted in.
Characteristics of immediate winners and losers
Table 4.2 showed that 25% of individuals will already have entitlement under the
current system of at least £146.30 by 2016. The protection of existing accruals
means that these people will experience essentially no change in their state
pension income at SPA under the new system. In addition, 59% of people would
be entitled to less than £146.30 under the current system but would also
experience no increase in their income as a result of the new system. Meanwhile,
18% of the sample would see their state pension entitlements increased (and
10% would experience an increase of £10 a week or more). Just 4% would see
their rights reduced.
As alluded to in Chapter 3, different groups of people are affected by the reform
in different ways. For example, those who have had periods of self-employment
are likely to be relative winners, as they have previously only earned entitlement
to the BSP. In order to understand the full impact of the reform, it is therefore
interesting to examine the characteristics of those affected in different ways by
the proposed single-tier pension.
Of those who gain at least £10 per week of state pension income at SPA, 73% are
women, 53% of them are in the lowest education group and 39% have been selfemployed
at some point in the past. On average, this group has spent 11 years in
employment since 1975. In contrast, among those whose entitlement under the
current system will already exceed £146.30 in 2016 and who therefore
experience no increase in their state pension income at SPA, 89% are men, 43%
are in the lowest education group and 27% have been self-employed. This group
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