State pension: New data reveals which Britons LOSE MONEY by paying into compulsory fund

The top 10 per cent of male earners will pay more in national insurance during their working lives than they will get back in state pension income, according to new analysis.

Employees and the self-employed earning or making profit over a certain amount are required to pay national insurance in order to build entitlement to benefits such as state pension.

Research found that 40-year-old male employees who are in the top 10 per cent of earners will pay £250,000 in national insurance contributions but will only receive £248,000 in state pension if they live to age 90.

Analysis by the Pensions Policy Institute, an independent research group, compared the contributions of those aged 20, 40 and 60 to how much they could receive when they retire.

By contrast, a man also aged 40 but on average earnings would pay £138,000 in NICs and would receive £213,000 in state pension – if they lived to age 87.

And a male of the same age but among the lower 10 per cent of earners would pay £56,000 in NICs, would receive £179,000 in state pension until the age of 84.

The analysis is based on the expectancy that higher paid workers will live longer than lower earners, meaning they are in receipt of the state pension for longer.

It found that top-earning 40-year-old men were the only group likely to receive less state pension than NICs paid in.

Sir Steve Webb, a former pensions minister, said the analysis showed that the state pension represented “extremely good value for most people”.

Jason Hollands, managing director of Evelyn Partners, the wealth manager told the Financial Times: “While the analysis by the Pensions Policy Institute demonstrates that the vast majority of people across the income and age spectrums will typically receive back more than they have contributed, this is not going to be the case for middle-aged high earners, who are also shouldering a relatively high proportion of the total income tax burden.

“Whether or not it is by deliberate design, the system therefore has a creeping redistributive element to it that is likely to become more pronounced if the state pension age rises further, as seems inevitable given the costs of the system and rising life expectancy.”