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How Will the Changes to Pensions Affect Your Employment Rights?

The government’s plans to reform public sector pensions are threatening to incur a series of stoppages as serious as the general strike of 1926, according to the Unison General Secretary David Prentis. He says that the plans could affect the employment rights of up to 10 million people in forcing them to pay more in pension contributions and work longer before retiring.

What changes?

Work and Pensions Secretary, Iain Duncan Smith believes that: “If Britain is to have a stable, affordable pension system, people need to work longer, but we will reward their hard work with a decent state pension that will enable them to enjoy quality of life in their retirement.” These plans are designed to reflect the increasing level of life expectancy in the UK. To support them, the government plans to make it illegal for employers to force employees to give up work at 65 and plans to increase the age by which someone becomes eligible for state pension to 66. This reform could be implemented as soon as 2016.

The government is defining the changes as the beginning of a ‘universal’ pension scheme, with the potential for a flat-rate payment of around £140 per week. In order to subsidise these changes, National Insurance contributions will be raised.

What are the effects?

The detractors of these proposals insist that the government is simply penalising public sector workers. Unison President Angela Lynes says that: “The Government is determined to hit us with a triple whammy – they want us to pay more, work longer and then get less when we retire.”

The argument that the introduction of a universal system does seem to be misleading. The Telegraph reports that, in order to qualify for the full amount, worker will have to build up a National Insurance record. Those that fall below the required amount will not receive the full payment and, ultimately, this will affect those who have taken time out of work – such as women choosing to raise families and those affected by illness or disability.

The biggest losers

It is also suggested that the biggest losers will be middle-aged men who have enjoyed full employment through their working lives. Their National Insurance contributions will rise by an anticipated 3.2% and yet their wages will not reflect that loss in earnings. In addition, they will have to work longer to achieve the qualifying age to receive a pension – effectively meaning that they will receive less in their retiring years.

Unison members working in local government have already taken industrial action in defence of their pensions and it is likely that around 1.3 million worker will be balloted for strikes later in the year. Mr Prentis warns that if there is no deal struck by the unions regarding pensions, this action will be “indefinite”. Political history has proven that reforms are generally unpopular and that initial ‘teething problems’ are often part of the process.

However, these are being hailed as the biggest reforms since the introduction of National Insurance and the effects they are likely to have on employment rights are perceived as more negative than otherwise.

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