The State Pension will move to a flat rate system in 2016, improving the lot of some and worsening that of others.
As the UK government moves to replace the current means-tested State Pension system with a flat rate system, the Institute for Fiscal Studies has concluded that workers in their 20s and 30s will be the “big losers” under the new plan while self-employed workers stand to gain up to £1,000 more per year.
The new State Pension system is due to be introduced in 2016, and figures from the Department of Work and Pensions also suggest that the lot of the self-employed will improve and that of younger workers will decline.
Changes to State Pensions
Under the current system, a basic state pension of £107 per week can be topped up via several different means-tested schemes. But under the new system pensioners would receive a flat rate of £144 per week removing the element of means testing.
Beneficiaries will also be required to pay National Insurance for 35 years as opposed to the current 30 years, a change which has led critics to denounce the plan as being bad for pensioners. The retirement age will also increase, meaning that people must work for longer before being entitled to a state pension.