Worse off in retirement with the new state pension

From today, those reaching State Pension age will receive their income in retirement based on a new system.

This means that men born on or after 6th April 1951 and women born on or after 6th April 1953 will receive their State Pension on the new basis, assuming they qualify.

The full new State Pension will be £155.65 per week, but not everyone will get this full amount.

New analysis of the Department for Work and Pensions’ (DWP) impact assessment of the new State Pension, carried out by the Pensions Policy Institute, has found that the majority of millenials will see a notional loss from the new State Pensions.

This analysis has found that around three quarters of people in their twenties are forecast to lose a notional average of £19,000 over the course of their retirement.

The 2.1m people who receive a notional gain under the terms of the new state pension are expected to receive an additional £10,000 on average.

For people in their thirties, around two thirds will be worse off under the terms of the new state pension.

[tweet_box]Two-thirds of people in their thirties will be worse off under the new state pension[/tweet_box]

This cohort will lose an average of £17,000 in retirement.

The 2.7m people in their thirties who make a notional gain due to the new state pension will receive an extra £10,000 on average.

Chris Curry, Pensions Policy Institute, said

“As well as simplifying the State Pension system, the new State Pension also significantly reduces the cost of state pensions in the future.

“While the majority of millennials will see a notional loss of state pension income as a result of the introduction of the new State Pension they will benefit from greater clarity about what that income will be.”

The change to the state pension system should serve as a wake-up call for anyone thinking about their own retirement.

As the UK population continues to age, the cost of supporting people in retirement will inevitably grow for the taxpayer and it is likely we will see further reform to state pensions, designed to limit or even reduce costs.