State pensions: not quite what was advertised
Most people reaching state pension age today are receiving less
than the new state pension.
A Freedom of Information (FoI) request from the Sunday Times
revealed an interesting fact about the new state pension, which
started life just over a year ago on 6 April 2016. The newspaper
asked how many people who had reached state pension age (SPA) since
that date had received at least the new state pension (originally
£155.65 a week, now £159.55).
The response from the Department for Work and Pensions (DWP) was
that between 6 April 2016 and 31 August 2016 - so roughly in the
first five months - 41% of people reaching their SPA (65 for men,
about 62 and a half for women) had pensions at least equal to the
new state pension. Or, to put it another way, 59% got less than the
headline 'single-tier' amount which the government so heavily
It was always the case that what was promoted as a 'flat rate'
pension was going to produce anything but that for many people,
with the numbers receiving less than the full amount gradually
declining as the new scheme matured. According to the DWP's own
calculations, by 2020 slightly under half of new state pensioners
will receive less than the full rate, while by 2030 that proportion
shrinks to just under 20%.
This was well-known to pension experts, but not made clear in
much of the information supplied to the public. The House of
Commons Work and Pensions Select Committee, in its report on
"Communication of the new state pension" said that the potential
shortfalls had "…not been made sufficiently clear in government
communications that…focused on the full flat rate of £155.65".
If you want to see what you are currently projected to receive
when you reach state pension age (which, don't forget, may be
changing again from 2027), then the starting point is the
government website https://www.gov.uk/check-state-pension. Even if
you are entitled to the full amount (or more), it is worth putting
that figure into context: for a 35-hour week, the newly increased
National Living Wage provides £262.50, almost two thirds more than
the full flat rate state pension. Which means you may want to
review your non-state private pension provision…
Who writes this?
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Richard has worked in the financial services industry for over
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