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21 Jan 2015

Less Than Half Of UK Retirees Will Get Full Pension Payout

The latest government figures show that just 45% new UK retirees will get access to the flat-rate state pension for the first five years of the system, BBC News reports.

The government announced the plans for the new state pension two years ago, with the aim of making the system more straight-forward. Although it won´t apply to the country´s current 11 million pensioners, it will be available for new pensioners as of April 2016.

However, investment firm Hargreaves Landown recently submitted a freedom of information request to get further information on the matter, and found that just 45% of UK workers retiring between 2016 and 2020 will be entitled to the full payment of around £150 a week. This means that some two million people will not receive the full amount.

This could be because they have a gap in the National Insurance (NI) contributions, or because their private or workplace pension rules them out of the state second pension.

Experts also point to the fact that people are having to work until an older age. This means that from April 2017 savers will need to have paid in 35 years´ worth of NI contributions to qualify for the full pension amount, as opposed to the current 30 years.

Anyone who has paid NI for just a few years will not qualify for the new state pension at all. However, some carers receive NI credits despite being out of the workplace.

Commenting on the findings, Hargeaves Lansdown´s Tom McPhail expressed concern that many individuals are likely to get a shock regarding how much pension they will receive - especially if they haven´t done their research.

“The new state pension will ultimately be a simpler and fairer system. However, in the short term it will be complicated and many people are likely to get less than they may expect,” he explained.

Meanwhile, the Department for Work and Pensions (DWP) has highlighted that this information should not be misinterpreted, and that new pensioners will not be worse off than those under the current means-tested system.

They have also featured a state pension calculator on their website.

Copyright © M2 Bespoke 2015

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