Pensions  

Pensioners reliant on state benefits reaches all time high

Pensioners reliant on state benefits reaches all time high

The number of pensioners solely reliant on benefits has risen to its highest level since the 1990s.

Analysis of statistics from the Office for National Statistics by pension administrators Equiniti showed that in 2017/18 17 per cent of single pensioners and pensioner couples had no income to supplement that provided by the state pension, an increase from 14 per cent the previous year.

Single pensioners were most dependent on the state pension with 25 per cent having no additional income, the highest level ever recorded.

Chris Connelly, propositions & solutions director at Equiniti, believed improving awareness of retirement savings was key to increasing the amount of independent income available to retirees.

"These figures underline how important it is that people continue to learn about the importance of a later life income. Auto-enrolment has gone a long way to improving behavioural trends in pension saving, however for the cohort closest to retirement it remains a concern that they will not have any funds of their own." he said.

State benefits have increasingly grown over the past 10 years with payments totalling £11,900 a year (£229 a week) accounting for 43 per cent of pensioner income.

The introduction of the pensions dashboard in 2022, which will enable individuals to see their pension pots in one place, could help people become more aware of how much they have saved for retirement and ensure they do not have to rely on the state pension as much.

"In the short term, the introduction of the dashboard may help some recent retirees discover other benefits they may have lost touch with. It is important we make sure they receive everything they are entitled to.

"For later generations coming through, dashboards will also help them understand the likely income they may receive in retirement and give them time to do something about improving it,” said Mr Connelly.

"Improving financial education will be the long-term answer to ensuring those starting out in their careers consider putting money away for later life as the norm. Otherwise state benefits, for however long they last, will continue to provide a significant chunk of retirees’ income and continue to be one of the biggest challenges for the public purse."

The pensions dashboard will allow savers to log in and view all pension pots in one place enabling them to easily see their expected income in retirement. 

There will be more than one pensions dashboard available as banks, employers and advice services may all decide to develop one. It is up to the saver to decide which dashboard they want to use however, the government expects all dashboards to be free and user-friendly.

According to the Pensions Dashboard Prototype Project, it is estimated that around £400m of pensions savings was lost due to individuals forgetting about various pension pots. The pension dashboard is expected to tackle this problem by tracking the pension pots an individual has and collating them all in one place.