Personal Pension  

Research reveals state pension confusion

New research has revealed consumer misunderstanding about the state pension, including whether people qualify for it and what the weekly amount is.

Prudential surveyed 1,044 UK adults, of which 18 per cent did not believe they will qualify for the full flat rate state pension of £155 per week, due to come into effect on 6 April 2016.

However, 21 per cent of women believed they will miss out, compared with 14 per cent of men.

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As it currently stands, to qualify for the full state pension, people need 30 years of national insurance contributions, but this is set to increase to 35 years from April 2016.

Almost half of those who think they will miss out believed they would do so as a result of taking career breaks to raise children, although 20 per cent said they will not meet the target due to long-term illness.

The research also found that only 14 per cent of adults who believed they will not reach 35 years in employment will make voluntary additional National Insurance contributions, to ensure they qualify for the full state pension.

For those who fail to clock-up the necessary 35 years in employment, additional years can be bought in voluntary contributions, or can be credited to those who receive Jobseeker’s Allowance or Employment and Support Allowance.

People who claim child benefit for children under the age of 12, those who are unable to work through illness, and carers, can also claim added years.

Prudential’s study also found that 27 per cent of those aged over 55 were not aware of the state pension reforms, however this figure rises to 53 per cent among the total adult population.

There is also confusion around how much the new state pension will be worth. On average, those surveyed believe it will be worth £125 a week, compared with the actual £155 a week from April 2016; although 11 per cent thought it would be £170 a week.

Tim Fassam, pensions policy expert at Prudential, said: “The launch of the flat rate state pension in April 2016 is designed, in part to make it easier for people to understand how much they will receive from the state, in turn enabling them to better plan for their retirements.

“But inevitably, due to the changes to the rules on eligibility, there will still be differences in what people receive. It is therefore important for everyone to obtain all the relevant information so that they can make an informed decision, if they need to make up additional qualifying years through working longer or making voluntary contributions.

He added that people should not rely on the state pension alone. “Saving as much as possible as early as possible in your working life, and seeking professional financial advice in the run-up to retirement, will help to ensure that you are best placed to make the most of your savings when you’re ready to stop working.”