Pensions  

Pensioners will not miss out on new state pension

Pensioners will not miss out on new state pension

The government has moved to reassure that pensioners retiring in 2016 will not denied a full flat-rate pension, following claims in a freedom of information request that 2m pensioners would “miss out”.

A DWP spokesman said: “Language about people ‘missing out’ is utterly misleading. Those retiring when the new state pension is in place will get at least what they would have got for the national insurance contributions they have paid in the current system, and many will get more.”

According to a FOI request submitted by Hargreaves Lansdown, up to two million pensioners retiring between 2016 and 2020 would miss out getting the new state pension and will get less than they might have been led to expect by the government.

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Tom McPhail, head of pensions research at the Bristol-based firm, said that up to 3.5m workers would reach state pension age between 2016 and 2020. Of these, just 45 per cent would be entitled to receive a full new state pension of at least £148.40.

He said: “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.”

The DWP spokesman denied this and said that the pension reforms would create a simplicity that has not existed in decades, giving people a greater sense of economic security and peace of mind in retirement.

The spokesman said: “The new state pension will tackle inequalities of the past, with women, carers, lower earners and the self-employed set to benefit the most.”

Alan Higham, retirement director at Fidelity Worldwide Investment, said that there were two reasons why people would not be entitled to the full state pension.

For some, this was because they were contracted out of some of the state second pension, which is being integrated into the new flat-rate state pension. Others have a gap in their National Insurance contributions.

Last week, findings from Age UK suggested millions of savers risked running out of money in retirement.

In response, Mark Fawcett, chief investment officer of the national auto enrolment pension scheme Nest, said: “These findings highlight a fundamental challenge for the pensions industry. How can we give savers the flexibility they want without sacrificing the security they need?

“This isn’t a question of annuities versus drawdown. We need innovative solutions. Otherwise we risk leaving the retirements of millions of people with normal sized pension pots to chance.”

Adviser View

James Garman, director of Nottinghamshire-based Retirement Specialist, said: “No one will miss out or be worse off therefore its a bit of a non-story. Some things have changed but no one will be disadvantaged.

“There was an expectation from a lot of people that they would all receive the full flat-rate pension, which may have come as bit shock, but even with this they are no worse than the previous scheme. The change is a good thing and over time, and with one scheme rather than two, will make things much easier for people to understand.”