Nine million older pensioners in the UK are receiving £2,933 less annually under the new Prime Minister Andy Burnham, as the two-tier state pension system continues to create a significant divide. Those who retired before 2016 get the basic state pension of £9,614 per year, while younger retirees on the full state pension receive £12,547 — a gap of nearly £3,000.
The Two-Tier System Explained
The older basic state pension is being gradually phased out, replaced by a single-tier full state pension introduced in 2016. Every year, more retirees qualify for the higher rate, but nine million people remain on the lower amount. This transition has been criticised for decades as unfair, with older pensioners missing out on the larger payments.
However, many on the basic pension can claim additional top-up payments, such as pension credit or savings credit, which may partially close the gap. The Department for Work and Pensions states that these supplements ensure no one is left without adequate support, though campaigners argue they are often underclaimed.
Impact Under Andy Burnham
The disparity persists under Burnham's leadership, as the new Labour government has committed to maintaining the current system while reviewing pension adequacy. In a recent announcement, Labour confirmed that low-income retirees would not be taxed if their sole income is the state pension, a move aimed at protecting the most vulnerable. This comes as the full state pension approaches the frozen income tax personal allowance, which could otherwise push more pensioners into paying tax.
For Birmingham residents, the issue is particularly acute. According to local charity Age UK Birmingham, many older people in the city rely heavily on the basic pension and struggle with rising living costs. "The gap means less money for heating, food, and essentials," a spokesperson said.
Long-Term Reform and Criticism
Critics have long argued that the two-tier system is inherently unfair, penalising those who retired before the 2016 reforms. The Women Against State Pension Inequality (WASPI) campaign has highlighted how women born in the 1950s were disproportionately affected by changes to pension age, compounding the disparity. The government has pledged to consider further reforms, but no timeline has been set.
As the phase-out continues, younger pensioners will increasingly benefit from the full rate, but for now, millions of over-65s face a significant financial shortfall. The new administration faces pressure to address the imbalance, with calls for a universal flat-rate pension gaining traction among advocacy groups.
