Millions of over-55s are unaware of the imminent changes to the UK state pension, according to research by AVIVA (Financial Advisor Clifton Bristol).
According to the insurer’s latest Real Retirement report, barely two out of three over 55s are aware that the current state pension will be abolished and replaced by a new “single-tier” or “flat rate” scheme on 6 April 2016.
The new scheme will pay £155.65 a week to those with 35 years of National Insurance (NI) contributions, bringing to an end the current basic state pension that pays £115.95 a week, which workers are able to top up through additional state pension.
AVIVA also found that where people are aware of changes, there is widespread uncertainty as to how much they will be eligible to claim. According to the survey, 39% of those aged between 55 and 64 believe they will get the full state pension of around £156 a week, while a further 42% are unsure.
Although the scheme off a flat rate for retirees with 35 years NI contributions, deductions will be made for those contracted out of the additional state pension, meaning many retirees will get less than they expect.
“Just over 100 days until the new state pension comes to life, this report quantifies the state of confusion that exists,” said Alistair McQueen, savings and retirement manager at AVIVA.
“Government state pension statements are showing that just 20% will get the full rate, some might get more but others will get less,” he added.
The report also uncovered confusion as to just who would be affected by the change with 16% of over 75s thinking they would receive the new state pension plus a further 26% weren’t sure.
Despite widespread confusion about the new state pension, it remains a central aspect of retirees financial security. McQueen said “Some 80% think the state pension is important to their own finances and 59% would struggle if it didn’t exist”.
As we reported in December, a Department of Work & Pensions Select Committee has launched an enquiry into the state pension reforms, following concerns that the government has failed to adequately communicate what benefits people retiring in April will receive.
(Moneywise, January 2016)
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