Why your state pension could fall short

Under new pension rules coming up in April 2016, people who reach state pension age will receive a new “flat-rate” pension in the place of the existing two-tier system. But many retirees could be in for a nasty surprise, says Natalie Stanton.

Governments never stop tinkering with pensions, but the changes coming up in April 2016 are significant by any standards. Those who reach state pension age after this date will receive a new "flat-rate" pension in the place of the existing two-tier system. This will pay roughly £2,000 per year more than it does at present, meaning the weekly state pension will rise from £115.95 to roughly £155.

You will need at least ten "qualifying years" of National Insurance contributions to receive any of this sum, and 35 years to get the full amount. At first glance, that sounds great. Not only will it mean more money, but it will simplify a system that has become mind-blowingly complicated. But many retirees could be in for a nasty surprise, as they will receive much less than the headline figures suggest. The reason for this lies in a now-defunct scheme, known as the state earnings-related pension scheme (Serps).

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Natalie joined MoneyWeek in March 2015. Prior to that she worked as a reporter for The Lawyer, and a researcher/writer for legal careers publication the Chambers Student Guide. 

She has an undergraduate degree in Politics with Media from the University of East Anglia, and a Master’s degree in International Conflict Studies from King’s College, London.