PensionsJun 23 2016

Government writes to Brits ineligible for state pension

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Government writes to Brits ineligible for state pension

The government has said it will send letters to about 100,000 people warning them they are unlikely to receive the new flat rate state pension unless they take action.

The decision came in response to a report by the Work and Pensions select committee, which called on the government “as a matter of urgency” to contact the large number of people who will not receive the full weekly payment of £155.65 a week.

In its report, the select committee claimed that 55 per cent of retirees would receive less than £155.65 a week this year, the first year of the new flat rate pension.

In most cases, the committee said this was “because of periods of contracting out or because they do not have 35 years of qualifying national insurance”.

Under the new rules, retirees must have made national insurance contributions for 35 years to qualify for the full £155.65 a week.

If they have worked for less than 10 years, they will receive no pension at all.

In its response the government committed to writing to the latter group.

“We have established that it is possible to identify individuals who are now within nine years of state pension age and whose National Insurance record suggests that they will not have 10 qualifying years of National Insurance contributions when they reach their state pension age,” the government said.

“Subject to normal testing, we propose writing to this group as a one off exercise, integrated into the overall awareness campaign.

“This will test whether direct mail is more effective for this group given we can identify them and we believe it is possible to formulate a clear message and call to action.

“We estimate that in the UK there are over 100,000 people within this group. We will evaluate this exercise to gauge its efficacy.”

Steven Cameron, head of pensions at Aegon, welcomed the government’s decision to inform people who stood to receive nothing from the state in their retirement.

“It is vital that this group understands this as early as possible rather than facing a shock at state pension age.

“Some may be able to take steps to improve their retirement prospects either through paying extra voluntary NI contributions or by contributing to a workplace or private pension,” he said.

“But this is just a first step and we urge the government to go much further and write directly to every individual to provide them with an estimate of what state pension they are on target to receive. This should then be updated periodically.

“Our research shows that millions of individuals have no clear understanding of how much or how little they may receive as a state pension.”

james.fernyhough@ft.com