13th July 2016
Just under a third (32%) of the UK population believe that the state pension will be as generous when they retire, according to new research from pension firm Aegon UK. A further third (33%) believed that it would still exist, but at a less generous level, while a tenth (10%) of those surveyed thought that there would be no state pension at all when they reached retirement, highlighting worrying levels of uncertainty around what is a financial lifeline for millions in the UK.
The pension landscape has undergone seismic shifts in recent years and this includes the state pension, with the previous two state pensions being combined into a single state pension and increases in state pension age coming into effect.
Research from Aegon’s fifth Retirement Readiness report suggests the UK population isn’t feeling optimistic about the future of the state pension, with only 11% believing it will be more generous when they retire, than it is today. Currently, the state pension triple lock initiative guarantees rises every year by whichever is the highest of either price inflation, earnings growth or 2.5%, offering a real boost to retirees, but ahead of the EU Referendum, the Government did cast doubt on its ongoing affordability on a vote to exit.
The role of the Government may be a factor in this lack of confidence in the future of the state pension, with an overwhelming majority (70%) of people admitting they do not trust the current Government to make fair decisions when it comes to reforming the state pension to strike the right balance between pensioners and those of working age. Increasing retirement age is a further concern. Over a third (36%) would like further age increases frozen, while another third (35%) believe you should be allowed to take a reduced amount from age 60.
Kate Smith, Head of Pensions at Aegon says: “Against a backdrop of almost continuous reform, it’s perhaps not surprising that just a third of people believe the state pension will be as generous when they come to retire. This wasn’t helped by the confusion surrounding the introduction of the new flat rate state pension with many reaching retirement finding they’re not entitled to the full pension of £155.65 per week. In an ageing society, the state pension is always going to be an expensive benefit to maintain, but it’s one we hope future governments will continue to support given that it underpins the majority of people’s retirement incomes.
“It’s heartening to see the Government has recently taken steps to improve its communications and online tools so that people can now find out how much state pension they will receive and from when. However this primarily relies on people asking for information and we’d urge more proactive personalised Government communication so that people have no excuse for not engaging with their pensions at an early stage. It vital everyone has the information they need to plan for later life and gain peace of mind.
“The stark reality is that for most people, the state pension alone will not offer them a comfortable retirement. Some may see it as a key societal safety net, and others as a key building block. Whatever your opinion, everyone deserves clarity on their expected entitlement so they can plan, and save to supplement this as necessary.”