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Young will have to reach 105 to see pensions benefit

By Julian Knight

People in their 20s will have to wait until they are 105 years old to see any benefit from the new State pension proposed by the Government, according to an alarming report from the Institute of Fiscal Studies (IFS).

The extensive report into who wins and who loses from the coalition's planned single-tier State pension, due to be introduced in 2016, found that younger people will be the worst hit.

One of the report's authors, Soumaya Keynes, warned: "For most of those now in their 20s and 30s, the reforms will reduce the State pension income that they can expect to get."

Ms Keynes used the example of someone born in 1986, earning a low salary, who would be entitled to £21 a week less under the single-tier system than the current State pension.

When future increases in pensions were factored in by the IFS, it found that some people in their 20s could have to wait until 105 until starting to enjoy an income higher under the new system than the one which is being replaced.

Malcolm McLean, pensions consultant at Barnett Waddington, said: "This report appears to confirm what many have suspected – that over the longer term the single-tier State pension will create more losers than winners and will produce savings, not increases, in Government expenditure."

Overall, the IFS concluded that "almost everyone" born after the mid 1980s will lose out through the new system by as much as £2,300 a year.

Tom McPhail, from Hargreaves Lansdown, said the plight of younger Britons could be much worse. He said: "The IFS figures are based on the Government being able to stick to its promise to raise the State pension every year – the so-called triple lock – but I don't think this is affordable in the slightest."

However, the IFS did say that some groups would benefit from the reforms.

The biggest winners are likely to be those with patchy employment records, such as women who have left the workforce to bring up children, the unemployed or those doing part-time and low-paid work. The self-employed are also likely to gain.


The existing two-part State pension system will be replaced by a new simplified State pension to be set at at around £146 a week from 2016.

The biggest gainers will tend to be those who have spent long periods out of work or doing low paid work. This includes a lot of women and the long-term self-employed, the report said. Women will typically gain £5.23 per week, compared to £1.62 for men.

Those with more than 10 years in self-employment will gain £7.51 per week on average, compared to £2.19 among those who have never been self-employed. For the next generation, the reforms represent a reduction in income, the IFS said.

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