‘Lack of understanding’ on state pensions, Age UK
Government must find ways to include current pensioners in any reforms, including state pension payouts, Age UK argues.
Over 94 per cent of people feel their state pension will not provide them with an adequate level of support in their retirement, an Age UK and Future Foundation survey has revealed.
Earlier this week, the Department for Work and Pensions’s data showed that around 130,000 people are receiving £7 or less a week and the same number are getting £230 or more a week.
Gordon Morris, managing director of Age UK Enterprises, said the figures showed how “complex” the state pension system can be.
He said: “These complexities have led to a real lack of understanding amongst the general population about what they will receive when they retire.”
Of the 1,000 who were surveyed by Future Foundation, 70 per cent believe that there is too little information provided about pensions.
This lack of understanding has created a culture of uncertainty, and some of this uncertainty is justified, Mr Morris said.
Age UK’s latest Silver RPI study in June 2012 revealed that costs continue to remain higher for those in later life. In the last year over 75s experienced inflation at 3.39 per cent compared to an average of 3.06 per cent. In addition, over 55s have been particularly affected by falling annuity rates, which have reduced real purchasing power over the past year.
Mr Morris said: “Given this, it was seriously concerning that three quarters of the 60 to 65-year olds we spoke to said they were not saving for a pension. This is probably why half of them expect to supplement their pensions and fund their retirement via their savings accounts.
The DWP said it will be simplifying the state pension by replacing the current complex system with a flat-rate state pension for new new pensioners set above the level of the means test, currently estimated at around £140 per week.
Mr Morris said: “Plans to introduce a fairer, flat-rate state pension for future pensioners are very welcome but we believe the government must also look at ways to include current pensioners in any reforms.
“It can’t be emphasised enough that financial planning can make an enormous difference to people’s lives. Statistics like these highlight the importance of financial planning in advance of retirement, so that the funding is in place for older people to enjoy the later stages of their life.
“Set against a backdrop of record low interest rates, rising inflation and increasing life expectancy retirement is likely to be longer than ever, meaning many are faced with a lower level of income.”