logo
What is pension clawback, and is your retirement at risk?

What is pension clawback, and is your retirement at risk?

Telegraph17-06-2025
Pension clawback is an outdated feature that's still embedded in some final salary pension schemes, which could see your retirement income cut once you reach state pension age.
Clawback has become controversial. Over the years it has taken people by surprise and negatively affected their retirement plans. Women have been hit particularly hard by the rules.
Over the years, many final salary schemes, also known as defined benefit schemes, which guarantee a set income for life, have changed their rules or phased out pension clawback, choosing to either cap it or scrap it. But there are still some that are affected.
Here, Telegraph Money explains what pension clawback is, what impact it can have, and what you can do about it.
What is pension clawback?
How is pension clawback calculated?
What impact could pension clawback have on my savings?
What can I do about pension clawback?
Will the Government abolish pension clawback?
What is pension clawback?
Pension clawback, which can also be referred to as 'pension integration' or 'bridging pension', is an outdated feature of some defined benefit workplace schemes.
It dates back to 1948, when the state pension was first introduced and linked to defined benefit schemes. Clawback aimed to prevent individuals or schemes from overpaying on pension contributions, on the assumption that the state pension would top up the retiree's income, enabling the employer to offset some National Insurance costs.
The state pension and defined benefit schemes are no longer linked, and these 'National Insurance modification' rules were abolished in 1980, but some work schemes are still designed around them.
Lisa Picardo, from PensionBee, said: 'When an employee reaches the state pension age, this practice allows employers to 'claw back' some of the pension contributions made.'
This penalty cuts the workplace pension based on the assumption your state pension will 'top-up' the shortfall.
Ms Picardo added: 'The problem is, this can result in an unexpected noticeable drop in income just as someone reaches a milestone they've been working towards their whole working lives.'
How is pension clawback calculated?
Pension clawback is taken as a fixed cash amount, calculated based on your years of service linked to the affected pension scheme, when you reach or have reached state pension age.
This means that employees who have worked for the same number of years can have the same amount of money deducted from their pension payout, even though they did very different jobs and earned very different amounts.
This is in contrast to other types of pension fees, which are often charged as a percentage of your pot.
Who is affected?
Anyone with a defined benefit pension that includes these rules can be affected by pension clawback. However, some will notice the effects more keenly – as pension clawback deducted from the pension is a fixed cash amount, it disproportionately affects those with smaller pension pots and lower pension incomes. Women, early retirees and lower-paid workers are often the hardest hit.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Trump issues warning to leaders as he arrives in Scotland
Trump issues warning to leaders as he arrives in Scotland

Sky News

time39 minutes ago

  • Sky News

Trump issues warning to leaders as he arrives in Scotland

Why you can trust Sky News Donald Trump has landed in Scotland for a four-day trip including high-level meetings - praising Sir Keir Starmer as "a good man" but calling illegal migration a "horrible invasion" that is "killing Europe". Crowds gathered at Prestwick Airport in Ayrshire amid a major security operation for the US president's visit. Mr Trump told reporters: "I like your prime minister. He's slightly more liberal than I am... but he's a good man... he got a trade deal done. It's a good deal for the UK." The pair are expected to discuss potential changes to the UK-US trade deal which came into force last month. Trump left Air Force One to head to Turnberry, one of his Scottish golf courses. Part of the trip will include the opening of another course in Aberdeenshire, billed as "the greatest 36 holes in golf". "There's no place like Turnberry. It's the best, probably the best course in the world. And I would say Aberdeen is right up there," the US president said. " Sean Connery helped get me the [planning] permits. If it weren't for Sean Connery, we wouldn't have those great courses," he added. During the trip, President Trump will also hold discussions with Scotland's First Minister John Swinney and EU Commission President Ursula von der Leyen, who is keen to secure a trade deal with the US. Mr Trump told reporters there was "a good 50-50 chance" of an agreement with the EU but added there were "maybe 20 different" sticking points. EU diplomats say a deal could result in a broad 15% tariff on EU goods and half of the 30% Trump is threatening to impose by 1 August. The US president touched on illegal immigration and gave European leaders a stark warning. "You better get your act together or you're not going to have Europe anymore. You got to get your act together," he said. "But you're allowing it to happen to your countries and you got to stop this horrible invasion that's happening to Europe. Immigration is killing Europe." 1:30 He was also scathing about the installation of wind turbines across the continent. "Stop the windmills. You're ruining your countries," he said. "It's so sad. You fly over and you see these windmills all over the place, ruining your beautiful fields and valleys and killing your birds." Domestically, Mr Trump faces the biggest political crisis of his second term in office over his administration's handling of files linked to disgraced financier and sex offender Jeffrey Epstein, who died in prison in 2019. He faced another round of questions after stepping off Air Force One. "You're making a big thing over something that's not a big thing. I'm focused on making deals, not on conspiracy theories that you are," he said. Mr Trump added that "now's not the time" to discuss a pardon for Ghislaine Maxwell, Epstein's imprisoned accomplice. 17:35 👉 Follow Trump100 on your podcast app 👈 While the president's visit did attract some enthusiastic flag-waving supporters at Prestwick Airport, he is also likely to trigger a number of protests, prompting Police Scotland to call in support from other forces in the UK. The Stop Trump Scotland group has planned demonstrations on Saturday in Edinburgh, Aberdeen and Dumfries. About 70% of Scots have an unfavourable opinion of Mr Trump, while 18% have a positive opinion, an Ipsos poll in March found. Mr Trump is staying at his Turnberry property on Scotland's west coast this weekend, before travelling to Aberdeenshire on Monday, where he will open a second 18-hole course. He is due to return to the UK in September for a state visit hosted by the King - the first world leader in modern times to undertake two UK state visits.

Green light for thousands more e-scooters on England's streets
Green light for thousands more e-scooters on England's streets

Times

time42 minutes ago

  • Times

Green light for thousands more e-scooters on England's streets

Tens of thousands of extra e-scooters are set to arrive on English streets after ministers gave the green light to expand city and town rental schemes. Under updated guidance from the Department for Transport (DfT), new local authorities can apply to have e-scooters run by companies such as Lime, Voi or Dott in their area. It is the first time since the pandemic that new areas have been able to apply for e-scooters. Many are expected to do so and industry figures are in discussions with at least 12 councils, including big cities such as Manchester, Brighton, Leeds and Sheffield. At present there are 18 areas across England that operate e-scooter rental schemes on a trial basis, including London, Newcastle and Birmingham, but the scheme has been frozen for new applicants until now. It has proven controversial in some areas. Critics say rental e-scooters and e-bikes litter pavements and are dangerous for users and pedestrians. In July Dame Joan Collins, the actress, said there had been an 'invasion' of e-bikes and e-scooters in London, which was destroying the capital. The rental schemes have certain universal rules, such as a cap on speeds and scooter safety standards, but it is up to individual local authorities to decide regulations on parking or specific areas where users can ride. The changes by the DfT extend the e-scooter rental trial period to at least 2028 while the government gathers evidence on how best to regulate them. Any new area applying to be part of the trial must bring in a 'new feature', such as offering helmets to users or variable speed limits. A senior boss at Voi, the UK's largest rental company, said in June that a transport 'revolution' was coming to the UK, although it may 'hurt a little'. The company aims to have a fleet of 50,000 extra e-bikes and e-scooters on the streets within five years. Christina Moe Gjerde, vice-president for northern Europe at Voi, said the extension could allow the company to double the size of its UK business. 'E-scooters have already proven to be safe, sustainable and affordable, and legislation is needed so they can be here long into the future,' she said. 'We have seen some of the highest utilised schemes in Europe in the UK but growth is falling behind what we are seeing in other markets and part of this is the regulation not allowing for schemes to further grow.' Lime hailed the extension of the e-scooter trial as 'great news'. At present only e-scooters rented through official trials are legal on UK roads but retailers have been selling private devices for years and their popularity has exploded since the pandemic. Police have been accused of largely turning a blind eye to their use. However, in recent years some police forces have stepped up efforts to tackle the problem of e-scooters being used illegally. Since the City of London launched its cycle response unit in 2023, the team have seized and destroyed almost 600 e-bikes and e-scooters, up until June. • What are the police doing about dangerous e-scooter riders? Ministers are said to be acutely aware of the need to find a permanent solution to rules around e-scooters and to bring to an end the patchwork of trials. Transport ministers would like to put forward a bill in the next King's speech to update the law to reflect new modes of transport. It could include changing the way private rental companies are regulated and also make private e-scooters legal for the first time. Under planned laws that would enable private devices to be legalised, riders could be forced to display licence plates and take out insurance. It is believed that such measures would help police clamp down on antisocial behaviour linked to the scooters. The DfT said: 'Safety is at the heart of all e-scooter trials and riding a privately owned e-scooter on public land remains illegal. We are extending trials to deepen our understanding of e-scooter safety as we move towards legislating around their use, to better crack down on nuisance and antisocial use.'

Calls to revamp Newport city centre as shops boarded up
Calls to revamp Newport city centre as shops boarded up

South Wales Argus

timean hour ago

  • South Wales Argus

Calls to revamp Newport city centre as shops boarded up

Research by Centre for Cities found that Newport has a retail vacancy rate of 19 per cent, more than double London's 8.5 per cent. The study also found that nearly 5 per cent of high street expenditure escapes Newport and is spent in neighbouring Cardiff. This is due to low local spending power, an abundance of retail space, and retail spending leakage to bigger cities. Natasha Asghar has called for a major city revamp (Image: Office of Natasha Asghar) Natasha Asghar, South Wales East Member of the Senedd, has called for an urgent revamp of Newport city centre. She said: "Newport has a lot to be proud of and is a fantastic city, but it is clear more needs to be done to revamp the city centre and increase footfall. "Businesses in Wales are operating under extremely challenging conditions having to contend with the highest business rates in Great Britain and the hike in National Insurance contributions. "It is imperative that the Labour Welsh Government and Labour-controlled city council put their heads together and come up with a meaningful strategy to fully regenerate Newport and unleash our city's potential." One of the prime examples is the Wildings centre, which has remained shut since 2018. Wildings has been boarded up in Newport city centre for years (Image: NQ) The Centre for Cities report recognises a significant drop in the number of empty units since the last report in 2022 but highlights an issue that distorts the true picture, according to Newport Council. The statistics are significantly impacted by the oversupply of retail properties in the city centre. Newport has the largest amount of retail space per head than any of the other 62 centres featured in the report. This means that while the number of occupied premises is similar to some other places, including high-performing retail centres such as Milton Keynes, this is masked by the oversupply of commercial units. Newport Council leader Dimitri Batrouni says the council are determined to transform the city centre (Image: NQ) Newport Council leader, Councillor Dimitri Batrouni, said: "We absolutely agree that the number of retail units in the city centre needs to be reduced as the centre is too big for present-day demand. "The challenge is that city centre properties are mainly privately owned, sometimes by absent and neglectful landlords, and it will require significant investment to achieve a reduction. "However, we are determined to transform our city centre to be fit for the 21st century." The report also highlights the increasing footfall figures. In the first quarter of this year, it was 10 per cent higher than in the first quarter of 2019, before the pandemic and the sharp rise in online shopping. John Griffiths MS has said Newport needs more tools to improve the city centre experience (Image: NQ) John Griffiths, Member of the Senedd for Newport East, said: "High streets across Wales and the rest of the UK are all going through challenging periods and Newport is no different. "But I am pleased Welsh Government is backing our town and city centres – through schemes such as the Transforming Towns fund. "There is always more to do – and I would like to see some changes around compulsory purchase orders, so councils such as Newport have more tools to improve the overall city centre experience." The Welsh Government announced a consultation on plans to change business rates in Wales in May, giving smaller shops a lower rate, with the consultation running until August. A Welsh Government spokesperson said: "We co-funded the recently approved Newport City Centre Placemaking Plan through our Transforming Towns Programme. "This sets out a strategic vision to transform Newport's city centre into a vibrant and thriving destination. "We know our towns and city centres bring people together, sustain local economies, and underpin communities' sense of pride, heritage and belonging. "That is why we have protected budgets for our Transforming Towns Programme, with £40 million available for 2025-26. "This funding will help breathe new life into these spaces and develop our town centres as locations for a range of services, beyond retail." Jayne Bryant MS has welcomed recent investment into Newport, including the refurbishment of Newport Market (Image: NQ) Senedd Member for Newport West, Jayne Bryant MS said: "Newport, like any other high street across the country, is navigating a challenging and transformative period. 'As the Member of the Senedd for Newport West, I welcome investment in the city centre, including the refurbishment of Newport Market, the redevelopment of Market Arcade, and the new Leisure & Wellbeing Centre that's under way.' 'It takes time, bold decisions, and sustained investment to deliver lasting regeneration. We are firmly on that path, the impact on Newport is already visible in rising footfall, thriving independents, and a continued sense of pride in our city.' The Centre for Cities calls for £5 billion in public investment to remodel struggling city centres. The report recommends that the government treats city centres as critical parts of the national economy and allocate £5 billion of its recently announced £113 billion investment to remake city centres with more office space, improved public realm, and fewer shops. It also suggests that cities increase the size of the catchment of their city centres through building more homes in inner-city locations, as opposed to more developments on the edge of town. The report also advises that cities should be realistic about visitor strategies and should prioritise making city centres attractive to residents first, as visitor appeal will follow.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store