Less than half of pensioners are set to receive the full state pension in the first 5 years, yet may have already spent their private pension savings before they retire.
A million pensioners are set to get less than 86 per cent of the full rate, with just 45 per cent of those retiring between 2016 and 2020 set to receive full state pension amount, a freedom of information request submitted by Hargreaves Lansdown has revealed.
The majority of people falling short of the full state pension are likely to have been contracted out during their working lives; others who get less than 100 prer cent are likely to be those with interrupted National Insurance contribution histories such as mothers and the self-employed.
Tom McPhail, Head of Pensions Research, Hargreaves Lansdown: ‘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. With the new pension freedoms meaning that they will be free to spend all their private pension savings, it is imperative that they receive a proper state pension forecast. Without this, they could get a nasty shock when they do reach state pension age’
Approximately 3.5 million workers will reach their state pension age between 2016 and 2020. Of these, just 45 per cent will be entitled to receive a full new state pension of at least £148.40.
With the new pension freedoms due to start in April 2015, all these people will potentially be able to access their private savings before their state pension age.
The data released shows 30 per cent of pensioners will get less than 90 per cent of the new state pension, meaning that they will be entitled to a state pension income of no more than £133.56 a week
“In fact the position is slightly worse than stated. This is because the projections provided by the DWP are based on the current Pension Credit minimum income of £148.40, whereas the state pension in 2016 is likely to be around £155 per week – based on the assumption of two years’ worth of increases at 2 per cent a year. This means the 90 per cent threshold is actually only going to be around 85 per cent of the new state pension; so 30 per cent of pensioners – 1 million people – will be getting less than 85 per cent of the new state pension.