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The news comes just weeks after the Department for Work and Pensions revealed that 16 million people under the age of 43 would be worse off as a result of the new state pension and will fuel fears that young people's financial security could be heading for a crisis.
Chris Noon, an actuary at Hymans Robertson, a pension firm, warned the new system would have a “Robin Hood” effect which would most hurt those earning £40,000 to £70,000. He said: "Middle earners struggle to replace a decent chunk of their salaries in retirement more than any other group, and this loss will make life even harder for them."
Ashley Seager, co-founder at the Inter-generational Foundation, a think tank, said: "This is another example of the costs of adjusting to an ageing society falling mainly on young people - in this case the aspirational young which the county so badly needs.
"At the same time those already over the drawbridge in comfortable, risk-free retirement are not asked to make a contribution while knowing that generations coming after them will be much worse off in retirement."
With just 45 days to go, for the first time the Telegraph can reveal exactly who will win and who will lose under the new regime, and by how much:
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The numbers: how younger savers are worst affected
The most astonishing trend is how strongly the effects of the changes will be felt by savers in their twenties and thirties – when compared to older generations.
Younger savers in middle- to high-earning jobs will be by far the biggest losers, with their retirement prospects drastically scaled back as a result of the reforms, according to calculations for Telegraph Money by broker Hargreaves Lansdown.
Those earning above the higher rate tax threshold (£42,385 for 2015-16) from age 25 can expect to lose a quarter of their final pension pot if the Government introduces a 20pc flat rate of tax relief on pensions.
Under the current system, a 40pc taxpayer could achieve a pension of £645,050 by 67 if they saved £250 a month into a pension and attracted real returns of 3.5pc a year on their investments.
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The calculations also assume their wages and subsequent pension contributions grow by 3pc a year. If their tax relief is halved from 40pc to 20pc, they would have £485,787 at retirement.
Even if a flat rate of 33pc – the best possible flat-rate option the Government is believed likely to choose – were introduced, they would still stand to lose £58,644.
Conversely, younger savers on lower wages, or those who would be unlikely to pay higher-rate tax during their careers, would be the biggest winners in a flat-rate system. A new 33pc rate of tax relief on pensions would add £102,619 to a modest-earning 25-year-old’s pension, while a 35-year-old stands to gain £69,639.
Older savers will be hit, but less so
Older savers in their forties and fifties will also be impacted by the reforms – but to a lesser degree, as they are closer to retirement. A move to a 20pc flat rate of tax relief would still result in a £20,461 loss for higher-rate taxpaying 55-year olds, the data shows. Meanwhile a basic-rate taxpaying 55-year-old could receive a welcome £8,928 boost to their retirement fund if the Treasury opts for a 33pc flat rate of tax relief.
katie.morley@telegraph.co.uk
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Source: http://telegraph.feedsportal.com/c/32726/f/579309/s/4d39bd40/sc/13/l/0L0Stelegraph0O0Cfinance0Cpersonalfinance0Cpensions0C12130A0A120CRevealed0EOsbornes0Epension0Erevolution0Ewill0Ecost0Eyoung0Eprofessionals0E1612630Bhtml/story01.htm
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