A report from the Institute of Fiscal Studies (IFS) found that younger people will be the worst hit by the Coalition’s planned single-tier state pension, due to be introduced in 2016. Overall, the IFS concluded that “almost everyone” born after the mid 1980s will lose out through the new system by as much as £2,300 a year.
The report’s co-author, Soumaya Keynes, warned: “For most of those now in their twenties and thirties, the reforms will reduce the state pension income that they can expect to get.”
Keynes used the example of someone born in 1986, earning a low salary, who would be entitled to £21 a week less under the single-tier system than the current state pension. When future increases in pensions were factored in by the IFS, it found that some people in their twenties could have to wait until they were aged 105 years old until starting to enjoy a income higher under the new system than the one being replaced.
Malcolm Mclean, pensions consultant at Barnett Waddington, said: “This report appears to confirm what many have suspected – that over the longer term the single-tier state pension will create more losers than winners and will produce savings, not increases, in Government expenditure.”
What’s more, pensions specialists believe the IFS report actually underestimates the financial pain for those in their twenties and thirties. Tom McPhail, from Hargreaves Lansdown, said the plight of younger Britons could be much worse.
“The IFS figures are based on the Government being able to stick to its promise to raise the state pension every year – the so-called triple lock – but I don’t think this is affordable in the slightest,” he said. “In addition, the state pension will probably go up again, if you are retiring around 2030 don’t expect to get any state pension before you are 70.”
The report’s co-author, Soumaya Keynes, warned: “For most of those now in their twenties and thirties, the reforms will reduce the state pension income that they can expect to get.”
Keynes used the example of someone born in 1986, earning a low salary, who would be entitled to £21 a week less under the single-tier system than the current state pension. When future increases in pensions were factored in by the IFS, it found that some people in their twenties could have to wait until they were aged 105 years old until starting to enjoy a income higher under the new system than the one being replaced.
Malcolm Mclean, pensions consultant at Barnett Waddington, said: “This report appears to confirm what many have suspected – that over the longer term the single-tier state pension will create more losers than winners and will produce savings, not increases, in Government expenditure.”
What’s more, pensions specialists believe the IFS report actually underestimates the financial pain for those in their twenties and thirties. Tom McPhail, from Hargreaves Lansdown, said the plight of younger Britons could be much worse.
“The IFS figures are based on the Government being able to stick to its promise to raise the state pension every year – the so-called triple lock – but I don’t think this is affordable in the slightest,” he said. “In addition, the state pension will probably go up again, if you are retiring around 2030 don’t expect to get any state pension before you are 70.”
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