Britain's oldest citizens have lost more than £1,000 compared to younger retirees due to complex differences between state pension systems, analysis reveals. The gap between older and newer pensioners has steadily widened since the introduction of the new state pension system in 2016.
Men born before April 6 1951 and women born before April 6 1953 receive the old state pension, which is not fully protected by the triple lock that guarantees annual increases for those on the new system.
The triple lock ensures the new state pension rises each year by the highest of wage growth, inflation or 2.5 per cent, while older pensioners see their payments increase at a slower rate. This disparity is set to grow further, according to calculations by wealth management firm AJ Bell.
Around 9.3 million people currently receive payments under the old state pension system, while 3.4 million are enrolled in the new scheme, according to Department for Work and Pensions figures. The basic element of the old state pension stands at £169.20 per week, amounting to £8,798 annually.
This is nearly £3,000 less than the new state pension payment of £11,502.40 per year. Those on the old system can receive additional payments through the State Earnings-Related Pension Scheme (Serps), which increases annually with inflation.
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Britons face £1,000 shortfall due to 'horribly complex' state pension retirement rules
The pre-2016 system has faced criticism for providing older pensioners with an unfair deal, particularly affecting women and self-employed workers who historically earned less or paid lower National Insurance contributions.
Analysis examined two pensioners who began with equal payments - one receiving the new state pension of £8,094 annually, and the other drawing the basic old pension of £6,204 plus Serps to match the total.
Over the years, the difference between these payments has grown due to lower increases applied to the Serps portion of the old pension. By April 2025, pensioners on the old system will have lost £1,031 compared to those receiving the new state pension.
The changes created a system of winners and losers by removing the earnings link present in Serps, with women particularly affected due to historically lower earnings and fewer years in paid work.
Pensioners are at risk of a retirement shortfall GETTY Under the old system, Serps payments can provide significant additional income, with some pensioners able to receive up to £218.39 extra per week.
This means some pensioners on the old system could actually receive higher total payments than those on the new scheme.
Sir Steve Webb, a former pensions minister and architect of the new state pension, said addressing these disparities would be "horribly complex".
"It is true that new state pensioners benefit from the triple lock on a larger slice of their pension than those on the old system," the LCP partner said.
"But changing this would be far from straightforward. The Serps calculation under the old system is unique to each individual and it would be horribly complex to try to deliver to each individual on the old system a triple lock increase based on their own individual circumstances."
Caroline Abrahams, the campaign director of Age UK said it was understandable that pensioners might feel "resentful" about the payment differences.
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Pensioners are worried about the cost of living GETTY "If you are in advanced old age and struggling to make ends meet, it must be galling to learn that some people who retired more recently than you are receiving a higher state pension," she said.
She noted this was particularly frustrating for those who had paid all their National Insurance contributions and could not have done more to boost their retirement income.
"In an ideal world, there would be more consistency in the amounts of state pension different age groups of older people receive when they are in similar circumstances," Abrahams added.
"But unfortunately that's not where we are today, and it is understandable that some pensioners feel resentful as a result."
