A new report by the Institute for Fiscal Studies (IFS) has shown that employed workers currently in their twenties or thirties will be at least £1,000 a year worse off under the new flat-rate pension scheme, whereas the self-employed will benefit.
The current two-tier pensions, which consists of the basic state pension and a second state pension will be replaced by a simpler, single-tier pension worth about £144 a week from 2016.
At the same time the number of years workers need to have made national insurance contributions will also change and the pension applying to couples will be replaced with individual payments.
The Institute’s analysis of the changes shows that 43 per cent of those reaching state pension age in the four years after 6 April 2016 will be better off a result of the reforms, and that retirees will typically receive £2.74 more in their weekly income.
The greatest beneficiaries of the changes are likely to be those who have spent long periods out of work or doing low-paid work, including women nearing retirement who have raised children. The long-term self-employed will also see their state pensions rise under the changes.
According to the IFS, women will be £5.23 a week better off, while men will only benefit by £1.62, while those who have been self-employed for 10 years will be £7.51 better off. However, people born in 1986 will receive £1,000 a year less when they retire, while high earners could get as much as £2,300 less.
For those who are concerned about what the incoming changes will mean for their pensions, or for those who want to discuss pension planning, our team of financial advisors are on hand to help.
As experienced, independent financial advisors, we offer tailored and impartial advice surrounding the best pension schemes available; as well as offering advice and guidance on all aspects of pension planning to ensure that you get the most out of your money both now and in retirement.
Marc Stemmer offers financial planning advice to businesses and individuals; helping them to achieve their financial goals.