16m young people worse off under new state pension

News


15 Jan, 2016

16m young people worse off under new state pension

At least 16 million people under the age of 43 will be worse off as a result of the new "flat rate" state pension, shows new figures released by the Government.

For the first time figures from the Department for Work and Pensions (DWP) reveal the extent to which young people will be the biggest losers of the reforms. The results show that the majority of people in their 20s, 30s and early 40s will be worse off by the changes to the state pension, with many facing lost income worth thousands of pounds over their retirement.

The findings come just 24 hours after MPs launched a major inquiry into "inter-generational fairness" over fears that the British state pension and welfare system is favouring pensioners at the expense of younger generations.

Experts described the news as "disturbing" and warned the move would contribute to an impending financial crisis for young people, who are already suffering from financial pressure, including lower wages, difficulty getting on the housing ladder, and increased student debts.

From April, people reaching state pension age will receive a "flat rate" worth £155.65 a week, instead of the current basic pension worth £119.30. Most people will not receive the significant amounts, but will receive more or less depending on their employment circumstances. The government's own figures show that the majority of people retiring before 2040 will be better off. Those retiring afterwards are largely worse off.

The DWP confirmed 53% of 43-year-olds will receive a lower state pension under the new arrangements when they reach state pension age in 2040. They will receive £572 a year less, or £17,160 over the course of a 30-year-retirement, than they would have done under the current system. An even higher proportion of twenty and thirty-somethings will lose out, with 76% of 24-year-olds facing a lower income when they reaching state pension age in 2060. Men of this age face the biggest losses and will get incomes £884 a year lower than under existing rules, which translates to a £26,520 loss over a 30-year-retirement.