WHAT PAYMENTS CAN YOU EXPECT TO RECEIVE FROM THE GOVERNMENT LATER IN LIFE?

In April 2024, the state pension rose by 8.5% to £11,502.40 a year for post-2016 retirees. However, according to new research [1], one in seven (14%) retirees receive less money from the state pension than expected. This highlights the need for more information about the payments people can expect to receive from the government later in life.

Over a fifth (22%) of retirees also said they entered retirement unaware of how much they’d receive from the state pension, while a quarter (26%) didn’t know how to calculate their entitlement. One in ten (10%) retirees also said they didn’t realise that their National Insurance contributions determine the level of state pension paid in retirement. Another 10% of retirees said it wasn’t easy to determine how much state pension they’d receive in later life.

GAPS IN PRE-RETIREMENT KNOWLEDGE

The research also shows there is a wide knowledge gap among those in the key pre- retirement age group [2]. Over a fifth (22%) of over 55s who are not yet retired do not know their state pension age, and just three in ten (29%) of this age group know how much the state pension is worth. Additionally, the research found that the understanding of the state pension system is poor across all ages, with participants struggling to explain basic aspects of how the system works.

The study revealed that knowledge gaps have led to several misconceptions, the most prominent being that each person’s National Insurance contributions are kept in a personal pot to be accessed when they reach state pension age when, in reality, it is funded on a pay-as-you-go system by current taxpayers [3]. This was a strongly held belief that impacted people’s views about the fairness of the system.

RECENT PENSION INCREASES AND FUTURE CONCERNS

The state pension remains a hot topic. Under the triple lock, while the increase in pensioners payments in April is a welcome boost for millions, concerns about its sustainability for future generations have been raised.

It’s worrying that many UK adults lack knowledge about specific state pension details, such as the value of their entitlements and when they qualify for payment. However, the state pension is a significant part of most people’s retirement income, and it’s clear that greater prominence and more accessible information are needed so people feel confident and can plan for their financial future.

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Source data:

[1] Boxclever conducted research among 6,350 UK adults for Standard Life. Fieldwork was conducted 26th July – 9th August 2023. Data was weighted post-fieldwork to ensure the data remained nationally representative on key demographics.

[2] Phoenix Group research, January 2024. Survey conducted by Opinium among 2,000 UK adults.

[3] Phoenix Insights (2023) An intergenerational contract: Policy Recommendations for the future of the State Pension

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESS BLE UNT L AGE 55 (57 FROM APR L 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.