The new state pension is being introduced in April 2016 but consumer research shows many people are confused by their entitlements.
Research commissioned on behalf of the Open University Business School’s (OUBS) dedicated research centre, The True Potential Centre for the Public Understanding of Finance (True Potential PUFin), found that 45% of employees (40% of men and 48% of women) don’t think they will get the full amount of the state pension.
Across those 45% of respondents, £114 was the average weekly state pension they believed they would receive. The main reasons they give for not getting the full amount are not having paid National Insurance contributions for 35 years (29%) and having been contracted out (13%). And 34% of female employees cite insufficient National Insurance contributions as being the reason compared to only 23% of men.
The results of the research reinforce the concerns highlighted by the ongoing True Potential’s ‘Tackling the Savings Gap’ research, which highlights the projected shortfall in financial resources and income in retirement across UK consumers.
Director of True Potential PUFin at the OUBS, Martin Upton, said:
It’s apparent that there is widespread uncertainty about the new state pension and this isexacerbated by a quarter (24%) of employees aged 30 or over not knowing whether they’ve ever been contracted out. Some mistakenly believe that they’ll be entitled to the full amount, whereas in reality they will be disappointed by the actual amount they receive with the inherent danger that it may then be too late for them to do anything to remedy the shortfall.
This research also found that the average age that people would like to retire is at the age of 62-and-a-half whereas the average age at which they think they will actually retire is 66. Almost a tenth (9%) of employees think they’ll never retire. It highlights the level of confusion around the new state pension, and the limitations in broader personal finance knowledge across the UK population.
In an effort to tackle this problem, True Potential PUFin recently partnered with Share Radio to launch a ground-breaking national broadcast version of its popular ‘Managing My Money’ course. The eight-week radio course is accompanied by a free online test with those who complete all the tests getting a statement of participation certificate from the Open University Business School.