Most men and almost half of retirees of both sexes will be worse off within a decade of the new single-tier pension taking effect than they would have been under the old system, according to new figures published by the Department for Work and Pensions.
The DWP has published figures showing that for the period 2026-2030, 45 per cent of those reaching state pension age will be worse off by an average of £9 a week. A further 55 per cent of people will be on average £10 a week better off.
The report, theImpact of New State Pension (nSP) on an Individual’s Pension Entitlement – First 15 Years of nSP,
shows 52 per cent of men retiring between 2026 and 2030 will be worse off under the new system, losing on average £11 a week.
The figures show the percentage of those worse off increasing with time – as the impact of capping contracted in individuals at the single-tier level or their foundation amount if high, is increasingly felt. Between 2016 and 2020 around 27 per cent of men and women will be worse off, by on average £3.
Some individuals will only be worse off by a few pounds because they have accrued a mixture of some contracted out and contracted in benefits. Corporate Adviser calculates that an average worker who have never contracted out could be up to £35 a week worse off.
The document does not reveal the impact on those who have no contracted out benefits. The DWP says around 80 per cent of people have been contracted out at some point in their working lives, although it has not said how many of these have only been contracted out for a handful of years.
Those with significant accruals of public sector and private sector DB pensions and contracted out personal and workplace pensions are better off, because they are able to continue accruing extra benefit as they will not have yet reached the single tier cap, while those with no pension provision of their own are worse off under the new system.