The Institute for Fiscal Studies has published an in-depth analysis setting out the winners and losers from Government reforms to the state pension.
Earlier this year, pensions minister Steve Webb confirmed the Government will press ahead with proposals to introduce a flat rate, single tier state pension for future retirees in April 2016.
The new state pension is expected to be worth around £144 a week in today’s prices.
The IFS has produced a report examining the impact the reforms will have on different sections of society.
The report says just 17 per cent of people who are close to state pension age will actually receive the single tier amount, primarily because they have contracted-out of the state second pension in the past.
Some 23 per cent of these people will be entitled to more than the single-tier amount, while 61 per cent will receive less.
According to the report, the biggest winners from the reforms will be those who have spent long periods out of work or doing low paid work, and the self-employed.
However, the IFS says for younger people – particularly those born after the mid-1980s – the reforms will result in an almost unilateral cut in state pension income. The main exception to this is the self-employed.
IFS research economist Soumaya Keynes says: “The single-tier pension proposals will boost the state pension entitlements of some of those who are close to state pension age.
“However, for most of those now in their twenties and thirties, although these reforms should make it easier for people to predict how much state pension income they will get, the reforms will also reduce the state pension income that they can expect to get.”
Radcliffe & Newlands chartered financial planner Mel Kenny says: “The IFS’ findings come as no surprise. Reforms to the state pension simply continue the shift away from reliance on the state and towards rewarding those who save.”