Over 55's still unaware of state pension changes
Millions of over-55s are unaware of the imminent changes to the UK state pension, according to new research from Aviva.
According to the insurer’s latest Real Retirement report, barely two-in-three over-55’s are aware that the current state pension will be abolished and replaced by a new ‘single-tier’ or ‘flat rate’ scheme on 6 April 2016.
The new scheme will pay £155.65 a week to those with 35 years of national insurance contributions, bringing to an end the current basic state pension which pays £115.95 a week, which workers are able to top up through the additional state pension.
Aviva also found that where people are aware of the changes, there is widespread uncertainty as to how much they will be eligible to claim. According to the survey 39% of those aged between 55 and 64 believe they will get the full state pension of around £156 a week, while a further 42% are unsure.
Although the scheme offers a flat rate for those people with 35 years NI contributions, deductions will be made for those that have contracted out of the additional state pension meaning many retirees will get less from the new scheme than they expect.
“Just over 100 days until the new state pension comes to life, this report quantifies the state of confusion that exists,” said Alistair McQueen, savings and retirement manager at Aviva.
“Government state pension statements are showing that just 20% of will get the full rate – some might get more but others will get less,” he added.
The report also uncovered confusion as to just who would be affected by the change – with 16% of over-75’s thinking they would receive the new state pension plus a further 26% who weren’t sure. “The message needs to go out that if you are already claiming the state pension, nothing is going to change,” McQueen added.
In addition to confusion around eligibility there were was also evidence that many people who are approaching the end of their working lives did not realise that state pension ages were changing. It found that only 62% of men knew that the state pension age for men and women were equalising compared to just 57% of women.
Aviva said that the government and pension providers need to do more to help and support those that are preparing to retire after April, but McQueen also said that individuals can help themselves by finding out how much state pension they will be entitled to by requesting a state pension statement.
“Currently only 5% of those who are eligible to get one, have actually requested one,” he said.
Despite widespread confusion about the new state pension, it remains a central aspect of retirees financial security. McQueen said: “80% think the state pension is important to their own finances and 59% would struggle if it didn’t exist.”
In October, a group of MPs launched an enquiry into the state pension reforms, following concerns that the government has failed to adequately communicate what benefits retirees will receive from April.
In a statement, the DWP Select Committee said: “Concerns are raised especially for people who are close to retirement now and may have done most or all of their retirement planning and saving under the ‘old’ system.”
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.