Savers will fail to claim as much as £2bn of pension credits this year, according to Unbiased.co.uk, the IFA search site.
Under the current rules, single people aged 60 or over can claim a guaranteed income of £119.05 a week while people aged over 60 who have a partner can claim £181.70 a week. A claimer’s income must not exceed the allowance to qualify for the benefit.
However, according to the research, between 20% and 25% of pensioners do not claim their entitlements. Unbiased.co.uk also says high-rate taxpayers covered for their retirement by a company pension scheme will give up an extra £739m to the tax man this year by failing to make Additional Voluntary Contributions (AVCs).
Department for Work and Pensions (DWP) figures from November last year show there were 2.74m pension credit claimants, and 3.34m including partners, out of about 11m pensioners.
Tom McPhail, head of pensions research at Hargreaves Lansdown, says: “The Government has contrived to construct a surprisingly complicated pension system. The Government has issued a further 40,000 pages of pensions legislation and guidance.
“People miss out on this kind of stuff because it is so complicated. The process for claiming the pension credit is long winded and cumbersome. The claims form runs for dozens of pages so there are a number of reasons why people don’t get to the finish line.”
McPhail also says eligible people might see the benefit as demeaning.
He says: “They grew up in the post war era where self-reliance was more of a social characteristic than it is today. Those who do decide to claim might become defeated by the complexity involved in applying for the money.”
Another reason for the claims gap is people eligible for the credits cannot afford the access to IFAs needed to learn about the process, McPhail adds.
A spokeswoman for DWP says: “Essentially the notion that claiming pension credit is complicated is a myth, and it is in part the repetition of this notion that puts people off contacting us.
“Applying is straightforward; doing so does not need to involve form-filling by pensioners - it can be completed in just one free phone call.
“There is no charge for the call. How long the phone call will take depends on an individual's circumstances.
“We want people to apply and are continually looking at new ways to encourage pensioners to claim this money. The Pension Service Local Service has a home visiting scheme, somebody from the service can come round to your house and work through the form, which has itself been made simpler and shorter, to help you claim. They can also help you claim other benefits you may be entitled to."
She says last year the DWP contacted 278,500 pensioners the department believed may have been entitled to pension credit and is now paying an additional £650,000 a week in council tax benefit to pensioners compared to the same time last year.
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