What I should have said...

26 April 2013
The proposed Single Tier Pension (STP) is designed to suit a 21st century world where the driving force in retirement planning is the need to provide for people who are spending longer and longer in retirement.

You know the feeling. You’re in a discussion and you just can’t find the right words. Ten minutes after the conversation finishes you think of the perfect explanation.

Given 3 minutes on BBC5 Live to explain the changes to the new state pension system, and why many people will be worse off under the new regime, I did my best but it wasn’t until the interview was over that I came up with what I should have said.

The thing is that the current state pension is not fit for purpose. It was first introduced in the early 20th century and was designed to suit the needs of men and women at that time. It does not suit us now. Three very key things have changed:

Life expectancy

We are living longer. In 2012 the average life expectancy of a 65 years old was 21.3 years (men) and 23.9 years (women)1.

As people live longer lives one of two things must happen. Either people will have to retire later or they will have to spend a greater proportion of their life relying on pension income. The government is basically saying they cannot afford to pay for the latter option.


When state pensions were introduced women were not expected to have a pension in their own right. It was not thought to be necessary since they could rely on their husband's pension, either as a pensioner’s spouse or his widow.

Nowadays the majority of women work and the vast majority are expected to earn their own pension rather than relying on a man, and I believe most of us would prefer it that way.

In fact many will be better off as a result of National Insurance credits for carers which will qualify equally with NI deduted from earned income

The role of the state

Current state pensions were intended to provide an adequate retirement income, and included an earnings-related element that would reward those with greater pre-retirement income.

The STP is designed to be a minimum safety net for people to build on. This government  believes its  primary role should be to prevent poverty; anything beyond that should be the responsibility of the individual.

The majority of those who will receive less under the new regime are individuals who lose out, not immediately, but in the long term, because of the loss of the earnings-related portions of S2P and SERPS. The government believes that this will be effectively replaced by contributions made through automatic enrolment.

Any individuals who might lose otherwise out in the short term will have their existing benefits protected by way of a foundation amount which acts as an underpin to future entitlements.


1 Source: ONS Pension Trends Chapter 2, Figure 2.5, 16 February 2012.

About the author

Fiona Tait

Pension Specialist

Fiona joined the life and pensions industry in 1989. She is a Fellow of the Personal Finance Society, an Associate of the Chartered Insurance Institute and is currently Vice-President of The Insurance Society of Edinburgh. Fiona specialises in the areas of at retirement planning and pensions and divorce.

Last updated: 13 May 2016

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