It’s no secret that the state pension pays out vastly different amounts to pensioners across Britain.
But did you know that there’s a huge disparity in the average sums pensioners are receiving in different regions?
Our analysis of official state pension records has also unearthed huge inequalities between age groups – with older pensioners winning out.
The amount of state pension you are entitled to will depend on your age and how many years you made National Insurance contributions
Money Mail today reveals that the state pension lottery means women who reached pension age a decade ago and live in the North East receive a staggering £3,500 a year less on average than older men living in the East of England.
Over a 20-year retirement, they will be paid as much as £70,000 less on average than men 200 miles south of where they live. So how do the regions and age groups compare? Why does your age mean you are likely to receive more – or less?
And what is it about the different parts of Britain that causes such large regional disparities?
Our analysis of official state pension records has also unearthed huge inequalities, with men aged 85-89 in East England taking home the most
Age isn’t just a number
The amount of state pension you are entitled to will depend on your age and how many years you made National Insurance (NI) contributions.
Anyone who reached state pension age before 2016 receives the ‘old state pension’, also known as the ‘basic state pension’, which pays up to £169.50 a week or £8,814 a year. You need 30 years of NI contributions to get the full amount.
Younger pensioners who have reached pension age since 2016 are on the ‘new state pension’ and can get up to £221.20 a week – £11,502 a year.
They need 35 years of NI contributions for the full amount.
The new state pension may appear more generous at first glance, but Government data shows older pensioners actually receive more than their younger counterparts.
The richest group of pensioners in the country is older retirees in their 80s and 90s, who are on the basic state pension.
This is because anyone on the old state pension was permitted to build up entitlement to extra state pension income.
Those who did so now receive this extra pension, known as ‘Serps’ (state earnings-related pension scheme), on top of their basic payment.
Some will receive only a few pounds extra. But others could be receiving as much as the full basic pension of £169.50 plus a maximum Serps pension of £218.39.
This adds up to a total of £388 a week, or £20,176 a year. Between 1961 and 1975 you could also build up a ‘graduated retirement benefit’, which also boosts your pension a few pounds higher.
Of all age groups, those aged 85 to 89 have the highest average income at £210 a week, compared to the average of £194 a week across England and Wales, according to official data.
How women are left Behind
‘Women have lost out on both state pensions and private pensions and end up much poorer in later life because they were caring for children or other loved ones and did not earn as much as men’
There has always been a pension gender gap, with a vast gulf between what men and women receive. Women across the UK receive an average of £183 a week, versus £207 for men.
This is because women are more likely to have gaps in their NI contribution record for periods they spent out of work looking after their children or elderly relatives while their husbands continued working. A lower income throughout their working lives has also contributed to lower pensions for those on the old state pension under the legacy rules. This is because the top-ups were calculated based on your earnings.
Baroness Ros Altmann, former pensions minister and a campaigner for pension inequality, says: ‘The poorest pensioners tend to be women who have been very much second-class citizens when it comes to pensions.
‘Women have lost out on both state pensions and private pensions and end up much poorer in later life because they were caring for children or other loved ones and did not earn as much as men.’
But the differences are even starker for certain age groups. On average women aged 75 to 79 and 80 to 84 receive almost £2,000 less each year than men the same age.
Likewise, older women have a significant, though slightly smaller gap. Women aged 85 to 89 receive £1,400 less than men their age and women over 90 receive £1,200 less each year.
These groups of women are often the worst hit because they retired under the old state pension rules, which made it hard to build up a decent state pension if you had a low income. Although the rules changed in 2016, introducing a flat rate and doing away with the top-up system which favoured men, it was too late for women who had already retired.
Steve Webb, a former pensions minister and now partner at consultancy LCP says: ‘Women who retired before 2016 built up their pension under old rules which were written after the Second World War.
Steve Webb, a former pensions minister and now partner at consultancy LCP says: ‘Women who retired before 2016 built up their pension under old rules which were written after the Second World War.’
‘They worked in an era when women had more barriers for joining the workplace and tended to get a low state pension.
‘The rules were less generous for women having kids who were often traditional homemakers.’
The gap is beginning to narrow for younger women. The smallest gender state pension gap is for recent retirees, with women aged 65-69 getting £300 less each year on average than men, while women aged 70-74 get £1,100 less on average than men. Although retired women of all age groups get less than men of the same age, younger women have benefited from the slightly more generous system introduced in April 2016.
Sir Steve, the architect of the 2016 state pension changes, reveals that improving the state pension system for women was one of his key motivations.
Oldest women may get more
Perhaps one surprise in the data is that older women in their late 80s often get slightly more than their younger friends.
Women aged between 85 to 89 receive an average of nearly £1,500 a year more than women aged 75 to 79, who are on the old state pension – although they still receive less on average than men the same age.
Sir Steve says this is because widows can inherit some of their husband’s additional state pension.
He adds: ‘A widow’s rate is usually substantially higher because it’s the full state pension plus some inherited state pension on top.’
However, since 2016 you can no longer accrue additional state pension under the new system so younger pensioners are less likely to receive an inherited top up when their partner dies.
Where you live matters
Pensioners in London get the least state pension on average, £500 less each year than pensioners in the East of England
Government data reveals stark differences between regions across all ages, with those in some pockets of the country receiving far less, including those in London and Wales.
Pensioners in London get the least state pension on average – £500 less each year than pensioners in the East of England.
Regional differences are even higher between men, with male pensioners in the East of England getting £800 more on average each year than men in London.
The regional divide is partly due to large differences in wages in different parts of the country and partly down to legacy rules under the old pension system.
Millions of pensioners were ‘contracted out’ of the state pension while they were working and therefore receive less from the Department for Work and Pensions. But it doesn’t necessarily mean they are any poorer in retirement because of this.
Those who were contracted out paid lower NI contributions and the money was instead diverted into a workplace pension scheme.
This means they receive a smaller state pension but should get a larger income from their workplace pension in return.
Overall, they are likely to be better off than those who did not contract out. Sir Steve says that regional differences also reflect different types of work across the country, with those in senior and public sector jobs more likely to have been contracted out.
Areas like East Anglia and the East Midlands, have fewer big cities with senior and public sector roles. So it’s unlikely that men in East Anglia are wealthier overall, and many will have smaller workplace pensions, although they get slightly more state pension income.
These disparities are disappearing under the new state pension, which pays out a flat rate to all those who paid NI contributions for the full 35 years required.
Richest and poorest
So who gets the most and who gets the least from the state in retirement?
Women between the ages of 75 and 79 in the North-East, Yorkshire, Wales, the South-West and London receive the smallest state pensions in Britain.
Meanwhile, men in their 80s and 90s receive the most, with older men in East Anglia, the East Midlands and the West Midlands cashing in the largest sums.
Men aged 85 to 89 living in the East of England receive £12,130 state pension on average each year, while women aged 75-79 in the North East get just £8,625 each year, a gap of £3,500.
Over a 20-year retirement, that adds up to a £70,000 difference.
- Do you get one of the largest or smallest state pensions? Write to us at moneymail@dailymail.co.uk
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