There is a “concerning” lack of understanding around the State Pension, warns Royal London.
New research from the pensions and investment mutual revealed that over half (51%) of those yet to access their State Pension either thought that everyone was automatically entitled to the full State Pension amount or were unsure who is entitled to it.
More than a third (37%) said they thought men and women were entitled to the State Pension at different ages, despite the age at which both sexes can claim their State Pension being equalised in November 2018.
Royal London said less than half (46%) of the 4,000 UK adults it surveyed knew that men and women would receive the same amount of State Pension if they had made equal National Insurance Contributions. A similar number of people (45%) were unsure if married couples and individuals received the same amount of State Pension.
The research also shone a spotlight on the confusion around how much the State Pension is worth, with £534 per month being the average figure people were expecting. This is around £350 less than the current full monthly amount of £886 under the new State Pension rules. According to Royal London, 52% of people who haven’t accessed their State Pension have never checked how much they are likely to receive and 45% have never checked their State Pension age.
Despite a lack of knowledge, as many as one in 10 people not yet retired expect the State Pension to be their main form of income in retirement. Yet, almost half (48%) of those below State Pension age said they would be unable to live comfortably on £886 a month, with £1,216 the average amount respondents said they would need in retirement.
Sarah Pennells, consumer finance specialist at Royal London, said: “The State Pension is the foundation of most people’s income in retirement, but for one in five of those who’ve retired, it’s their sole form of income. Living on £886 a month isn’t easy, especially currently during a cost of living crisis, and around a third of those we surveyed who are currently receiving the State Pension told us that they’re struggling and have to supplement it with other income or savings.”
With the cost of living challenges unlikely to ease any time soon, Pennells said it was “concerning” that some people are facing a retirement where they won’t have enough income for a good standard of living.
Pennells added: “I’d encourage anyone who has been putting off thinking about their retirement to make a start by getting a copy of their State Pension forecast. Once they know that, they can work out how much income they’d need in retirement to afford the life they’d like and can begin to plan what they need to do with their finances to start to bridge that gap. There are plenty of free online tools and resources to help you.
“The cost of living crisis is putting extra pressure on household budgets, but relying on the State Pension alone could mean many years of making very tough choices about spending for millions of people, so the more that people can do now to provision for their retirement, the more comfortable they could be in their later years.”
