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

Short-run effect on pensioner incomes
has spent on average 32 years in employment. These and other characteristics
are described in Table A.1 in Appendix A. 42
As shown in Table 4.4, the average increase in state pension income for men at
SPA under the proposed system is 86p per week; this compares with £4.34 per
week for women. Table 4.4 also provides some indication about which types of
individuals gain the most. Women who have ever paid reduced-rate NI
contributions are set to gain on average £5.22 per week, while people who have
been self-employed for more than 10 years stand to gain £6.66 per week. A large
proportion of individuals who have been in self-employment would gain, but
notably not all. Among those who have been self-employed for more than 10
years, 36% would gain, compared with 25% of those who have been selfemployed
for between 6 and 10 years. (Those reaching SPA in 2019 are much
more likely to gain than those reaching SPA between 2016 and 2018 because of
the composition of individuals – 53% of those reaching SPA in 2019 are women,
compared with 28% in 2016, 23% in 2017 and 28% in 2018. 43)
Those with lower levels of household total wealth per head are also more likely
to benefit: 36% of the least wealthy fifth of individuals would benefit, compared
with 9% among the wealthiest fifth. The mean change in pension income at SPA
among the least wealthy fifth of individuals is an increase of £3.99 per week,
compared with £0.53 among the wealthiest fifth of individuals. However, since
the least wealthy individuals are more likely to be eligible for means-tested
benefits, the interaction with means-tested benefits and the proposed abolition of
pension credit savings credit will have important implications for this conclusion
– this is discussed in more detail in Section 4.4.
Tables A.1 and A.2 in Appendix A present additional analysis of the
characteristics of those who stand to gain and lose state pension income at SPA
from the proposed reforms. 44
How gains and losses change if individuals plan to contribute
after April 2016
The preceding analysis described how the state pension income that individuals
could get at SPA under the new system would compare with entitlements under
current rules, assuming that individuals made no further contributions to the
system beyond April 2016. For the very first cohort to be affected by the
proposed reforms, this will be the final picture. However, for later cohorts, the
ultimate pattern of gains and losses (relative to what could be achieved under the
42
Appendix A is available online at http://www.ifs.org.uk/docs/report_singletier_pension_appendices.pdf.
43 This is simply because of the way that the female state pension age is being increased between
2016 and 2018, while the state pension age for men will not start increasing until 2018.
44
Appendix A is available online at http://www.ifs.org.uk/docs/report_singletier_pension_appendices.pdf.
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