Will You Be Worse Off with the New State Pension?

The new State Pension is a flat income of £155 a week - an increase on the current Basic State Pension of £115. But a new report suggests pensioners will actually lose out

Emma Wall 29 October, 2015 | 4:15PM
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Looking forward to getting £40 more a week when the State Pension increases next year? Think again. According to a report by Hymans Robertson, a whole swath of society will actually lose out when the new flat-rate Single Tier State Pension is introduced, some to the tune of a whopping £20,000.

According to the report, the new flat rate pension, designed to simplify retirement income, is far from simple. Currently, the State Pension is made up of the Basic State Pension available to all, and then topped up with Additional State Pension. This is determined by how long you have worked for – and made contributions via National Insurance through your wages.  This unfairly impacts those who take a break from work such as stay-at-home parents, and the self-employed.

Under the new Single Tier these individuals will do better; the long term self-employed for example are estimated to benefit to the tune of £2,000 a year. Those not in employment or who have contracted out will similarly benefit. You will still have to have made National Insurance contributions for a minimum of 10 years however – which is where Hymans say the problems lie.

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Emma Wall  is former Senior International Editor for Morningstar

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