Workers in their 30s and 40s will have maxed out what they will receive in state pension payments by the time they are 50 and will pay national insurance to the government for no extra benefit.
Regardless of how long they work or how much they pay into the state pension, they are unlikely to add a single penny to what they will receive in retirement, say actuaries Willis Towers Watson.
Research by the firm shows that under the old state pension, workers kept on accruing benefits up to retirement.
Under the new state pension, which started in April 2016, once 35 years of national insurance payments are reached, no extra benefits can be accrued.
Maxed out pension benefits
In short, once someone has worked for 35 years or has obtained an equal amount of credits, they will be paid the maximum state pension, currently just under £160 a week.
For someone graduating from university aged 21, that will happen when they hit 56 years old, providing they work all that time.
Any national insurance paid after that time will not increase their pension – and under current forecasts they will have a state retirement age of between 72 and 75 years old.
“It will be normal for someone who is constantly employed after leaving full-time education to max out their state pension in their fifties,” said David Robbins, of Willis Towers Watson.
Decades of tax with little return
“This leaves a period at the end of people’s working lives when paying NI will not add a penny to their state pension entitlements, making NI more like a straightforward tax.”
A Department for Work and Pensions spokesman agreed with the research but pointed out national insurance covers other welfare and health benefits than the state pension”.
“The new state pension is clearer and simpler than the old system, providing a firm foundation for people to build their private pensions savings on,” he said.
Willis Towers Watson believes that someone as young as 41 today could already have paid enough national insurance to be guaranteed the full state pension, if they started work at 18, earned a high income from the start and not contracted out of their pension.