Government moves to simplify the state pension will help people better plan for retirement, but present complexity means many are missing out on their benefit entitlements.
Steve Webb, the pensions minister, is determined to sort out the complexities of the state pension and its interaction with means-tested benefits.
He is the central figure behind the government’s commitment to introducing a £140 a week flat-rate state pension.
The pension, for those with 30 years’ National Insurance contributions, is set to be introduced from 2016 but, in the meantime, the current system means many pensioners are still not claiming their entitled benefits in full.
Getting what you deserve
In fact, figures from Just Retirement Solutions claim more than half of pensioners are losing out.
The specialist retirement intermediary said its 2012 survey of clients found 23% were failing to claim any benefits despite being entitled to them – losing an average £655 each year, with the highest amount unclaimed standing at £3,631.
The research also showed many of those not claiming benefits to which they are entitled were living in houses of around the average value, suggesting many of those losing out perhaps believe the fact they own property rules them out of receiving benefits.
The firm said its research tallied with official data that showed owner-occupiers are less likely to claim than those renting, and pensioner couples are less likely to claim than single (male or female) pensioners.
“Many pensioners are struggling to make ends meet due to insufficient pension income and depressed savings returns,” said Stephen Lowe, Just Retirement group external affairs and customer insight director.
“At the same time they are missing out by failing to claim the benefits they should be receiving, often to the tune of hundreds of pounds each year that could make a real difference to their quality of lives.”
He added: “With every client our professional financial advisers first check to make sure people are getting their full entitlement. These are usually people who had long working lives, bought houses and paid their taxes. Many have never claimed benefits in their lives and really don’t know where to start without an expert to help them understand what can seem a hugely complex system.”
Lowe said part of the problem was that people see continuous changes to the benefit rules as “constant tinkering” – making it hard for people to keep up with the complexities.
“Already this year, plans for a new flat-rate state pension have been announced and over the next two years we are seeing the introduction of the new universal credit and various other changes. If you are not professionally involved it is hard to keep up.”
Department of Work and Pensions figures show between 32% and 38% of those entitled to pension credit fail to claim. The total income lost is somewhere between £2bn and £2.8bn a year.
Lowe urged people to get financial advice to help navigate the complexities.
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