DWP State Pension gap leaves millions of pensioners £2,797 worse off every year

Older state pensioners across the UK are receiving up to £2,797 less annually in State Pensionpayments compared to other retirees.

The State Pension system in the UK is divided into two distinct schemes - basic and new - each with different rates, meaning your retirement date affects how much you receive from the Department for Work and Pensions (DWP). Men born before 6 April 1951, and women born before 6 April 1953, are entitled to the basic State Pension, currently valued at £176.45 per week if you qualify for the full amount.

However, men and women born after these dates will receive the new State Pension, worth £230.25 per week if you qualify for the full amount - £53.80 more weekly than older generations receive on the basic State Pension.

READ MORE: 'Super simple AI trick helps me sell clothes on Vinted - my sales have skyrocketed'

READ MORE: Eggs keep fresh 'for weeks longer' when stored in 1 common kitchen place

Over a full year, claimants of the basic State Pension can only receive a maximum of £9,175.40 in pension payments from the DWP, while pensioners on the new scheme can receive up to £11,973 annually. This means older generations are receiving a staggering £2,797.60 less per year, even if they qualify for the full rate.

According to the UK Parliament, an estimated 8.57 million pensioners claimed the basic State Pension in the 2024/25 tax year, while only 4.38 million were new State Pension claimants. As the vast majority of pensioners receive the basic State Pension, it means around 8.57 million are missing out on up to £2,797.60 annually compared to younger retirees on the new scheme, reports the Express.

However, age isn't the only factor that determines which State Pension you receive. Everyone eligible for the basic State Pension if already reached State Pension age, the amount you receive depends on your National Insurance record.

To receive the full basic State Pension, men typically need 30 qualifying National Insurance years if born between 1945 and 1951, or 44 qualifying years if born before 1945.

In contrast, women generally require 30 qualifying years if born between 1950 and 1953, or 39 qualifying years if born before 1950. Therefore, if you receive less than £176.50 per week, it indicates you have fewer than the full number of qualifying years.

Similarly, if you're on the new State Pension and receive less than £230.25 per week, you may need more National Insurance qualifying years to increase your weekly payments. You need at least 10 qualifying years on your National Insurance record to receive any new State Pension, and typically 35 qualifying years to get the full amount.

State Pension rates rise at the start of every new tax year on 6 April, with both pension schemes being uprated by 4.1% this year in line with the annual increase in the average weekly earnings index for May to July 2024, under the rules of the Triple Lock. However, despite the rate increases, older pensioners are still significantly worse off compared to younger generations on the new scheme.

The Department for Work and Pensions (DWP) announced that the new rates introduced in April this year will provide pensioners on the new State Pension with an additional £470 per year, while those on the basic scheme will receive an extra £360 annually.

Earlier this year, the DWP commented on the new rates: "With uprating in effect, pensioners receiving the full basic State Pension will see their weekly payments rise from £169.50 to £176.45 per week, worth an additional £360 a year. In addition, the full rate of the new State Pension will increase from £221.20 to £230.25 per week, an increase of £470 a year."

Help us improve our content by completing the survey below. We'd love to hear from you!