Men get almost £29,000 more than women during a typical 20-year retirement, new research has revealed.
The Which? study of almost 12.9million people receiving the state pension found that the average man receives £153.86 per week compared to their female counterpart who pockets only £125.98.
Out of the total pensioners looked at, 546,000 get state pension under the new system launched in April 2016, while the other 12.3million get payouts that started under the previous regime, based on Department for Work and Pensions figures.
Wide gulf: Men get almost £29,000 more than women during a typical 20-year retirement, new research has revealed
The new state pension was launched in April 2016, to overcome the complexities in the old state pension system, and applies to people retiring since then.
Among those who are better off are the self-employed and people who have taken time out of work to care for family members.
To receive the new state pension most people need at least 10 years of qualifying national insurance contributions – and 35 years of contributions to get the full amount.
But ‘contracting out’ of the second state pension for periods in the past means you might get less than the current £164.35 a week even if you paid in for the maximum number of years – see the box below.
Qualifying years could come from paying contributions or getting credits, for instance for caring for a family.
Which? also revealed that a person getting their pension under the old system may find themselves worse off compared with new recipients.
It found that people who had qualified for their pension since the new system was introduced typically received £12.54 more per week than those under the old system – adding up to a difference of £13,041 over a 20-year retirement period.
In the past, women have often found themselves getting a smaller state pension than men due to taking time out of work to care for family members.
But the research also suggested that the state pension gap between men and women is getting smaller.
Which? said that, in August 2017, the average payment received by women equated to 81.9 per cent of that received by men, up from 77.7 per cent in August 2013.
The DWP told Which? the new state pension is already reducing the gap between men and women.
It said in a statement: ‘Around 650,000 women reaching state pension age in the first 10 years will receive an average of £8 per week (in 2015/16 earnings terms) more, due to the new state pension valuation of their National Insurance record.’
Pension gap: Sir Steve Webb, director of policy at Royal London, said the short-term difference in pension outcomes was accounted for by transitional rules honouring the typically larger pensions that men had already built up by 2016 before moving to the new system
In response to the research, the DWP also told Which?: ‘The statistics currently available on the new state pension are not yet sufficiently representative to draw robust comparisons between the old system and the new one.
‘This is because they only cover the period April 2016 to August 2017: in that period only a few hundred thousand people have made new claims, whereas the statistics for the previous system are based on 12million people.’
A DWP spokesman added: ‘This analysis does not include the benefits from previous contracted-out pensions that were integral to the state pension system up to April 2016.
‘This means that it under-reports the incomes of millions of people.
New benefits: People who had qualified for their pension since the new system was introduced typically received £12.54 more per week than those under the old system
‘By focusing on one element of the state pension, it only provides part of the picture and risks undervaluing the combined impact of all parts of the pension system.
‘The new state pension is simpler than the previous system, with millions of people set to benefit and, by 2030, over three million women are likely to be on average £550 a year better off thanks to these changes.’
The full analysis appears in the May issue of Which? Money magazine.
Harry Rose, Which? Money editor, said: ‘Our evidence shows how variable people’s state pension payments still are.
‘Many pensioners will be shocked by the differences in average payouts to men and women and those qualifying under the old and new systems.
‘Some pay gaps will close eventually, but not soon enough for some.’
Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said: ‘The new state pension has been designed to treat men and women equally.
‘Someone with 35 full years in the new system will get exactly the same pension, whether they are male or female.
‘But, in moving to the new system, it was necessary for transitional rules to honour the typically larger pensions that men had already built up by 2016, which explains the short-term differences in outcomes.
‘This should not detract from the radical change which the new system brings, which will stop women being second-class citizens when it comes to state pensions.’
HOW MUCH IS THE STATE PENSION?
The basic state pension is currently £125.95 a week. It is topped up by additional state pension entitlements – S2P and Serps – accrued during working years.
The two-tier state system has changed for people retiring since 6 April 2016, when it was replaced by a new ‘flat rate’ state pension. This is currently worth £164.35 a week.
People who have contracted out of S2P and Serps over the years and retire after April 2016 get less than the full new state pension.
But they can fill gaps in unpaid and/or underpaid National Insurance in previous years, and build up more qualifying years if they have enough time between now and state pension age.
Workers needed to have 30 years of qualifying National Insurance contributions to get the old state pension, but they now need to have 35 years of contributions to get the new flat rate state pension.
But even if you paid in full for a whole 35 years, if you contracted out for some years on top of that it might still reduce what you get.
Everyone gets the option of deferring their state pension to get more in their later years. You can check your NI record here. This is Money
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