Half of poorest workers would be worse off under the NPSS

Standard Life is calling for a radical overhaul of means-tested benefits and the basic state pension after finding half of the poorest workers would be better off saving in an Isa than the NPSS.

Research conducted by the company as part of its official response to the Pensions White Paper shows that 50 per cent of workers earning under 25,000 per year will actually lose out under NPSS because any money they save will reduce their entitlement to means-test benefits.

The figures from Standard’s research show that anyone over the age of 42 earning 20,000 a year or less would be worse off if they are forced to pay 4 per cent of their earnings into the scheme, as will 35-year-olds earning less than 10,000.

Standard marketing technical manager Andrew Tully says the complexity of means-testing and the state pension, means many people auto-enrolled into the scheme would have difficulty in deciding whether it would be better to opt out. Workers who do not retire on a full basic state pension will lose 1 of pension credit for every 1 they save in their own pension.

The insurer’s response, which is due to be published next week, will support personal accounts but call for changes to means-testing and a single-tier basic pension set at “a more realistic” level for low-earners.

Tully says: “There need to be radical changes. As things stand, it would be better for many people to invest in an Isa than in the NPSS.”

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