New research by a leading actuarial company has revealed that people in their thirties and forties will get absolutely no benefit to their state pension if they continue to work after the age of 50.
Because of how the new state pension works, Willis Towers Watson is warning that vast amounts of the workforce in the UK could lose a major incentive for working into middle age. This is due to changes in the state pension system. Under the old system, people who began to receive their pension before April 2016 could keep accruing extra state benefits right up until retirement. However, under the new model, the maximum amount, currently £160 a week, is received in return for 35 "qualifying" years of National Insurance (NI) payments. Any years you work beyond that don't increase your pension.
David Robbins, a spokesperson for Willis Towers Watson said:
"It will be normal for someone who is constantly employed after leaving full-time education to max out their state pension in their fifties. This leaves a period at the end of people’s working lives when paying NI will not add a penny to their state pension entitlements, making NI more like a straightforward tax."
According to the research, it is possible that someone as young as 41 could already have paid enough National Insurance to be guaranteed a full state pension if they'd have started work at 18 and have been a consistent high earner. Under the recent proposed changes to the state pension age, this person would be expected to retire at 68, meaning that nearly 30 years of their later career added nothing to their pension.
A spokesperson for the Department for Work and Pensions did not dispute the findings by Wilson Towers Watson but noted that National Insurance covers a "wide range of welfare and health benefits, not just the state pension".
The spokesperson added: "The new State Pension is clearer and simpler than the old system, providing a firm foundation for people to build their private pensions savings on."