Thousands of people due to retire soon could face a deprived retirement

More than 60 per cent of pensioners reaching state retirement age in 2016/17 will receive less than the full rate of the new single-tier state pensioner, anticipated to be £151.25 per week, after 6 April 2016.

A Freedom of Information (FoI) request by Barnett Waddingham, an independent provider of administration and consultancy service, revealed older people retiring could be short by up to £35 per week. Those reaching pensioner age in 2020, the figure will drop to £15 and it could be 2040 before the majority of those who qualify for the new pensioner, receive the full rate.

Commenting on the figures senior consultant for Barnett Waddingham, Malcolm McLean, said: “Whatever the merits or demerits of the Government’s policy in this area, I really fear for the consequences of it, particularly so when considered in the context of the new freedoms and flexibilities on private pension saving now available.

“I am pretty sure a high proportion of the population is largely unaware of the impact past periods of contracting out can have on their entitlement to the new state pension and will not be expecting reductions to be made from the full rate in their own situation. Indeed many will have been misled by constant references to a new ‘flat-rate’ pension which as the Government’s own figures now show is hardly likely to be true for most people, at least in the immediate future.

“There is a strong possibility that many savers now under state pension age will be planning their retirement on the basis that they will be receiving a higher state pension than actually proves to be the case and will feel able to draw on and spend their private saving from age 55 at a rate which could leave them short of money at or beyond their state pension age.

“Unless they obtain a reliable forecast of their state pension (which we should all encourage them to do) or the Government takes it upon itself to automatically give them that forecast, if possible, from age 55 (which it should, in my view, seriously consider doing) there could be many problems ahead.”

The shortfalls are as a result of the requirement to make deductions for past-periods of ‘contracting-out’ in return for foregoing entitlement to the state additional pension (originally called SERPS). Individuals would have received deductions in their national insurance contributions or payments from the Government in lieu, into private pension arrangements.