A study undertaken on behalf of annuity provider Partnership has shown a “shocking” lack of understanding around eligibility for the state pension, despite an increasing number of recently retired pensioners gaining more than half of their income from benefits.
Over the last twenty years, the ‘recently retired’ have become increasingly reliant on benefits, with the proportion who receive over 50 per cent of their income from this source rising from 41 per cent in 1994/95 to 51 per cent in 2012/13.
The research, carried out among almost 1,500 consumers aged 40 to 70 by Opinion Matters in March of this year and over 2,000 consumers aged 45 to 70 in May 2014, found that while retirees rely on state support, the eligibility criteria is not clearly understood by this age group.
For instance, 59 per cent did not realise that delaying taking their pension until they need it could increase their benefits, while 43 per cent were unaware that they could pay voluntary national insurance contributions to make up for any years they may have missed.
The research suggested that this was unsurprising, as 29 per cent did not realise that they needed to work for a certain period of time to qualify for the full state pension. Some 26 per cent did not understand that taking time off to care for their families could result in a lower pension.
Mark Stopard, head of product development at Partnership, commented that many retirees seem to lack a fundamental understanding of eligibility criteria and how to improve their income.
“Taking simple steps such as paying voluntary national insurance contributions, delaying taking the state pension or ensuring you receive credits where appropriate mean that when people retire they can get the best possible outcomes.
“This will naturally not remedy the issue of people putting insufficient savings aside for retirement but it will provide them with some level of regular income.”
Prudential research published last week showed that more than one in seven of those planning to retire this year have no pension savings and will either be totally or heavily dependent on the state pension as their only source of regular retirement income.
It also highlighted the importance of the state pension to all people planning to retire this year – even those who have other forms of pension savings – as on average the state pension will provide 36 per cent of a 2015 retiree’s income.