Due to state pension system changes, the UK’s oldest retirees could be losing over £1,000, unfairly disadvantaging millions.
The issue stems from the split between the “old” and “new” state pension systems introduced in 2016. While the new state pension benefits from the triple lock – ensuring annual increases tied to the highest wage growth, inflation, or 2.5% – the old system is only partially covered.
New research by The Telegraph and wealth management firm AJ Bell shows that this has left older pensioners with lower payments that have grown more slowly over time.
People qualify for the old, “basic” state pension if they are a man born before April 6, 1951, or a woman born before April 6, 1953.
The full “basic” old state pension is currently worth around £8,798 a year, almost £3,000 less than the £11,502.40 available to someone on the new state pension. The new state pension is paid to men born after April 6, 1951, and women born after April 6, 1953.
Around 9.3 million pensioners currently rely on the old state pension, compared to just 3.4 million on the new system.
According to the analysis, for those who retired before 2016, this disparity could have already cost them over £1,000 and is only set to deepen.
Retirees on the old pension can top up their income through the State Earnings Related Pension Scheme (Serps). However, Serps increases are tied to inflation, not the triple lock, resulting in slower payment growth than the new system.
AJ Bell’s calculations show that, by April 2025, retirees on the old state pension will be £1,031 worse off than those on the new system.
In some cases, Serps can boost some pensioners’ old state pension payments by up to £218.39 a week, meaning they may receive higher payments than those on the new system.
Nonetheless, the system has left many others feeling shortchanged. Caroline Abrahams of charity Age UK called the situation “galling” for older pensioners struggling to make ends meet. She told The Telegraph: “This is especially true if you paid all your National Insurance contributions, meaning there was no more you could have done to maximise your state pension income in retirement.”
Sir Steve Webb, the former pensions minister who designed the new state pension, admitted the disparity is “deeply unfair” but warned any attempt to fix it would be “horribly complex.”
He explained that Serps payments under the old system are calculated individually, making it nearly impossible to align them with triple lock increases.
However, he noted: “Many people on the old state pension retired in an era when pensions in retirement were linked only to prices, so they have enjoyed a substantial improvement in their annual increases, just not as much as those on the new state pension.”
