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Majority worse off under new state pension by 2050

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Around 70 per cent of people will be worse off under the new state pension than they would have been under the old system by 2050, DWP figures reveal.

An impact assessment published today, which takes into account the final level of £155.65 a week for the first time, details the winners and losers from the reform.

While the Department for Work and Pensions says over 75 per cent of woman and 70 per cent of men will be better off, by 2050 seven in ten will be an average of £14 a week worse off.

Hargreaves Lansdown head of retirement policy Tom McPhail says: “The further into the future we go, the more losers there are. The message to those in their 20s today is that you can still look forward to a state pension but it’ll be less generous than that enjoyed by today’s pensioners.”

Hymans Robertson partner Chris Noon adds: “Far greater numbers across the whole workforce stand to lose out. While the DWP cedes this in its paper, the messaging to the public continues to focus on the winners.

 “While it’s great that these people are better off, 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. Two thirds of people in private sector DC arrangements do not save enough. Generally speaking it’s private sector workers who will be worse off under the new regime.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Well yes, obviously. It is unaffordable to keep the State Pension in its current form despite rising life expectancy. We need to pay less of it, therefore we would expect the majority of people to be worse off.

    If it turned out that we were going to pay more State Pension as life expectancy continues to increase it would be financial suicide.

    The fact that the government spins it to make it sound as if the new arrangement is better is dumb, but c’est la vie. “The Ministry of Plenty is pleased to announce that the chocolate ration has been increased to 20 grams per citizen.” The majority of people who understand that they are being spun at also understand why they are being spun at, and why the changes are necessary, in my experience.

  2. Largely agree with Sascha – the changes are being made with good reason.
    A related point not covered by Tom (or Sascha) is the simple point that the new state pension is going to (largely) end means testing. Save for your retirement now, and you won’t be penalised for it. Indeed, save for retirement now and you can have the money back in whatever form you like – it’s not locked in to an annuity provider.
    And obviously if people now save more for their retirement, they might not in fact end up worse off in the round. Hopefully quite the opposite.

    • I didn’t cover it because it’s balderdash. Saying that the new State Pension is the Pension To End All Means Testing is like saying that World War I was the War To End All Wars.

  3. And this I news, echoing Sascha’s words reducing the cost to the public purse is the whole object of the exercise.

    And with regard to MiB’s point about the virtual end to means testing DON’T YOU BELIEVE IT. If a week is a long time in politics then infinite retirement payments from the public purse will be infinitely meddled with by successive administrations to keep them at a level just above that necessary to keep the population docile.

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