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Two thirds to miss out on full state pension


Almost two thirds of people retiring will receive less than the full new flat rate state pension when it comes in next year.

A Freedom of Information request submitted by the Sunday Times shows 63 per cent of people reaching state pension age in 2016/17 will receive less than the expected weekly payment of £151.25.

Those missing out face an average shortfall of between £35 and £55 a week. For people retiring in 2020 the average shortfall will be between £15 and £25.

Barnett Waddingham senior consultant Malcolm McLean says contracting out of the state second pension is the main reason for shortfalls.

People who contracted out of S2P had their National Insurance contributions reduced in exchange for a lower state pension entitlement, and received extra pension from their occupational scheme instead.

He says: “Whatever the merits or demerits of the Government’s policy in this area, I really fear for the consequences of it, particularly so when considered in the context of the new freedoms and flexibilities on private pension saving now available.

“I am pretty sure a high proportion of the population is largely unaware of the impact past periods of contracting out can have on their entitlement to the new state pension and will not be expecting reductions to be made from the full rate in their own situation.”

He adds the Government should consider automatically sending a state pension forecast when people reach 55.

The exact figure for the new single tier pension is due to be confirmed this autumn.

People retiring before 6 April 2016 will receive payments based on the old system.

Workers need to make 35 years of National Insurance contributions to qualify for the full amount.



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. The impact that periods of contracting out will have on the single tier State Pension were not adequately conveyed by Mr Webb. This could turn out to be a huge headache for the current Government particularly given the fact that the DWP have confirmed that even if you have attained 35 years contracted in service plus some contracted out service, you may still not receive the full single tier State Pension!

  2. We need forecasts from age 50. 55 is late for doing much about it, especially as earning capacity gets riskier with failing health or ageism.

    And by the way, I can’t imagine IFA’s and insurers getting away with misleading a whole generation into thinking they’ll be getting £7,865 a year when it will be more like £5,525, a shortfall of 30%.

  3. You say “People who contracted out of S2P had their National Insurance contributions reduced in exchange for a lower state pension entitlement, and received extra pension from their occupational scheme instead.”
    Not necessarily any extra pension from their OPS (through the SERPS era) as if in the OPS long enough to build up benefits in its own right which pays more than the prescribed minimum then basically people have given up their second state pension benefits for nothing by being contracted out on the basis that the savings on the reduced NI contributions through being contracted out were a lot less than the extra pension that would have been received thru retirement if contracted in.

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