New state pension will see people in their twenties and thirties lose out by as much as £19,000 in retirement

5th April 2016

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Three quarters of people in their twenties are set to lose around £19,000 over their lifetime because of the new state pension reforms.

Thinktank Pensions Policy Institute has calculated that three quarters of those now in their 20s will lose a notional £19,000 over the course of their retirement.

Two-thirds of those now in their 30s will lose £17,000 while the remainder will gain an average of £10,000 in both cases.

This PPI has calculated that around 11.4 million younger workers will lose out. This is mainly because, under the old two-tiered system, people were able to build up additional savings into the state pension pot through the second state pension previously known as SERPs.

More generally, those with less than 35 years of national insurance contributions will also lose. Previously, they would have been due to full amount with just 30 years of contributions.

However many groups who currently lose out stand to benefit from the new system.

Daniela Silcock, Head of Policy Research at the PPI said “Differences in pension income are important because lower than average pension incomes can indicate a greater likelihood of living in financial hardship.”

“This report indicates positive movements in pension income for those from under-pensioned groups. Once the New State Pension has been fully phased in there will no longer be significant differences in state pension income between women, ethnic minorities, disabled people, carers, the self-employed and the average for all pensioners. However, lower private pension saving and income levels among the under-pensioned are projected to continue. These mainly arise from particular labour-market characteristics found more prevalently among these groups.”

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