Warning millions will lose out in pensions shake-up

Among those hardest hit will be 39,000 Scottish women in their early sixties who stand to miss out on up to £1900 a year, according to analysis by the Labour Party, which said the changes would create heavy losers.

Gregg McClymont, the Shadow Pensions Minister and MP for Cumbernauld, said: "Once again ministers have been caught with their hands in pensioners' pockets."

The Institute for Fiscal Studies (IFS) think tank also released a scathing assessment of the plans, saying the majority of people would be worse off.

Its analysis of those badly affected included some people ministers claimed would benefit, such as women who take time out to bring up their children.

The Government's white paper admitted more than half of people reaching state pension age after 2060 would be left worse off.

However, the Coalition defended the plans, saying they would help parents as well as part-time workers and the self-employed.

Ministers also said the changes would do more to encourage people to save for their old age while the simplification of the complex pensions system was also welcomed by older people's groups.

The main changes unveiled yesterday include:

l A new flat rate of £144 a week;

l The scrapping of the state second pension – although current entitlements "will be recognised";

l The abolition of pension credits, bringing an end to means testing;

l A rise in the years of employment needed to qualify for a state pension – from 30 to 35. In a major change, the years spent bringing up children will for the first time be counted towards that total.

The changes are to be introduced in 2017.

The IFS said those who were self-employed for long periods were likely to gain, as well as those who would become pensioners after 2017 and had yet to accrue £144 a week in the state second pension.

However, the think-tank warned many more would be worse off because ministers plan to cut the amount individuals accrue every year.

It said: "Therefore, in the long run, the reform will not increase pension accrual for part-time workers and women who take time out to care for children.

"In fact, in common with almost everyone else, these groups would end up with a lower pension at the state pension age under the new system than they would do under the current system."

Also hit will be current pensioners and those who retire between now and 2017. They will stay on the current £107-a-week pension.

Although the second state pension will be abolished, ministers said pensioners would still receive any extra payments to which they were entitled.

Labour also highlighted the specific case of women born between April 6, 1952, and July 6, 1953.

The party said they would also stay on £107 a week, while men the same age would receive the more generous £144 payment. The discrepancy will affect 39,000 Scots and 430,000 women across the UK.

Ministers said the anomaly was caused by the fact there had long been different state pension ages for men and women.

Mr McClymont added: "This Government's pension changes have hit hard-working women time and again and these reforms are no different. Almost half a million women will be nearly £2000 worse off compared to men, but instead of being honest with the women who will lose out this Government tried to bury the truth."

Currently, people start to build up their pension entitlements after just one year, but that will change to 10.

Ministers say this will mainly hit "backpackers" who come to the UK to work for just a few years before returning to their home countries.

LibDem Pensions Minister Steve Webb also highlighted the prospect of raising the state pension age.

While he pledged no further changes in this parliament, a new body will be set up to make recommendations every five years.

Joanne Segars, chief executive of the National Association of Pension Funds, said: "Today's announcement for a simpler, more generous state pension is a much-needed shake-up that will ultimately help millions of pensioners and savers."