Seven things to know about the new state pension!

Portrait photo of Barbara Castle

Portrait photo of Barbara Castle (Photo credit: Wikipedia)

        These charts have been kindly donated by Citywire and their New Model Adviser team (to whom we should be very grateful).

Each one of them surprised me.

I dedicate this little blog to one of my heroes, Barbara Castle. If we had kept to her vision , much of the mess we are digging ourselves out of today, would never have been created. (see slide six)

 

state pension -who benefits

Lesson one – it benefits us not our kids!

The impact of the flat rate state pension outlined in the DWP’s White Paper is interesting. Most of the benefit will be felt over the next 35 years. By around 2050, those with lower pensions will outweigh those with better pensions. Fine for us, not so fine for our kids!

State pension chart 1

Lesson two – it really will be simpler (though not for a few years)

The second graph shows how, once the transition from the current system has been completed (say by 2040), we all end up with the same state pension (the black bars are what would have happened if we carried on as we do today. This really does support the simpler/fairer story peddled by the DWP.

 

state pension -eligibility for pension credit

Lesson three; reports of the death of pension credit are exaggerated

Pension credit will be available to far fewer people but it won’t disappear over the hill any time soon.

state pension -gets better for women

 

Lesson four; women won’t reach pension parity with men for 25 years.

That said, they look likely to continue to enjoy their pensions for longer!

 

state pension - impact of triple lock

Lesson five; the single tier pension is not tinker-proof!

The graph above shows how easily the new pension could be downgraded if the triple lock was removed and far worse , the earnings link was broken

 

 

state pension historic value

.Lesson six; never forget the harm that was done to the basic state pension over the previous thirty five years!

The small upturn in the real value of your pension in recent years in no way compensates to the damage done to it since its high watermark in the late 1970s.

We are going to stay with the triple lock for many years to come if we are to get back to the expectations of Barbara Castle!

current and future expenditure

Lesson seven; the demographic time bomb has been defused!

Anyone who thought that we could not afford our state pension promises can think again, While we see a slight acceleration in the percentage of GDP allocated to providing this pension in the next 50 years, projected expenditure is remarkably stable and is likely to reduce over time as a result of the switch to the single tier pension.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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5 Responses to Seven things to know about the new state pension!

  1. Adrian Richards says:

    Henry

    Excellent look at the evidence. One comment on the first chart. The projections shown in to the very long term are subject to a lot of uncertainty. Earnings growth, prices etc could vary, so we need some caution in interpreting the very long term. When we get beyond the 2040s (I’ll be a pensioner with luck) the Govt will of course have a choice of deciding what level of single tier we can fund..

    They will probably also live longer and therefore have a higher SPA. Final hope, single tier still exists as a foundation for Pension Saving and they are enjoying a decent retirement based on automatically enrolled and voluntary saving.

  2. Joe says:

    On chart 5.3 I assume that “prices” in per CPI and not RPI which would look different. As a person who has just passed state retirement age personally I am glad that I will not suffer from a lower state pension under the new plan. If wonderful Barbara’s plan had not been changed in the 1980’s and early 1990’s I wonder just how much of this change would have been needed.

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