The new state pension will not benefit all age groups equally, experts warn, with the young particularly at risk of being worse off
When the Department for Work and Pensions (DWP) issued a report into the effects of the new state pension on individuals’ entitlements recently, it was hoping to bolster its claim that the new flat-rate scheme would “make millions of people better off”.
Number crunchers have now pointed out, though, that the figures also demonstrate that people in their teens, 20s and 30s will lose out from the changes, sparking accusations of “intergenerational unfairness”.
“By the time we reach the middle of this century, nearly 70 per cent of those retiring will be worse off than under the present system, seeing a reduction of nearly 10 per cent in their state pension income,” said Tom McPhail, head of retirement policy at pension firm Hargreaves Lansdown, adding that by 2040, those disadvantaged by the new system would lose an average of £11 a week.
Fast-forward to 2050 and the proportion of retirees who are set to lose out reaches 68 per cent, and the average “loss” increases to £14 a week. “The further into the future we go, the more losers there are,” added McPhail.
Meanwhile Chris Noon, a partner at pensions consultancy Hymans Robertson, stated that only 75 per cent of those who reach state pension age over the next 15 years – about 20 per cent of the entire workforce – would be better off. “What about the other 80 per cent who will generally be significantly worse off?” he said. “Far greater numbers across the whole workforce stand to lose out… Surely it’s more important to tell those who are set to lose out that they will, so that they can make up the shortfall – and have time to do so.”