Pensions, and whether we will be able to afford a decent standard of living in retirement, are a worry for many people. During the referendum campaign misunderstanding and misinformation was widespread. Now, the focus is on whether or not pensions will form part of the package of new powers and responsibilities to be devolved to Scotland as a result of the Smith Commission. However, changes to pensions law already agreed by the
UK Government could leave older people in Scotland worse off.
Everyone who has paid the appropriate contributions during their working life is entitled to a pension but the new rules do not take full account of Scotland’s circumstances.
The Pensions Act 2014 passed by the UK Government comes into effect in April 2015. The main changes are:
state pension age from 6 April 2016 onwards
Only people with at least 35 years of National Insurance (NI) contributions or credits will receive the full single-tier state pension. To qualify for any state pension, you will need at least 10 years of contributions. Those with between 10 and 34 years of contributions will receive a proportion of the pension. The new state pension is based on your National Insurance record when you reach state pension age but is already one of the lowest in Europe (see table below). If you have gaps in your National Insurance you may not get the full new state pension and the charity Age UK has warned that some people will lose out and could be worse off.
The new rules have far reaching consequences and could link state pension age to longevity so that someone born today is unlikely to receive a state pension until they reach 77 and their children will be working into their mid-80s.
Research by the Pensions Policy Institute demonstrates why these plans fail to take into account Scotland’s circumstances. The research considered projected life expectancy and found that increases in longevity in Scotland lag behind the rest of the UK by an average of 10 to 12 years. The Scottish Government has already made clear that it is unconvinced by Westminster’s timetable for increasing the state pension age.
The changes are geared to making pensions elsewhere in the UK more affordable by cutting the amount of money spent on pensions and increasing the state pensionable age but the knock on impact for Scotland is unfair because of the differences in life expectancy.