The mystery of the missing pensions
It’s been widely reported that millions of people have lost track of their workplace pensions as people change jobs and move house so often.
An estimated £19 billion is sitting unclaimed, with the average pension pot valued at £13,000. But it seems the problem is not exclusive to private pensions.
A new report has revealed that 250,000 State pensions have gone missing, leaving people without a monthly income to which they are entitled.
Financial consultancy Lane, Clark & Peacock (LCP) claims said there were 8.78 million people in the UK aged 70 or over, but only 8.53 million are receiving a state pension. This breaks down to around 97,000 men and 155,000 women.
Under state pension rules, all over-80s can claim a pension of £82.45 a week regardless of their National Insurance contribution levels – but 107,000 are getting nothing.
This means that around £400 million has gone unclaimed every year, affecting 65,000 women and 42,000 men.
There are a handful of reasons that some of the people identified in this study might not be receiving their State pension.
Some will have deferred their payments. The attraction of doing so, for those who don’t need the income yet – perhaps if they are still working – is that the State Pension payment increases by the equivalent of 1% for every nine weeks you defer. This works out as just under 5.8% for every 52 weeks. So by deferring for those 52 weeks, you’ll get an extra £10.42 a week (just under 5.8% of £179.60).
Equally, the amount of State pension paid depends on how many years of National Insurance individuals have paid. You need at least 10 years to qualify.
There’s also a small number of people that claim certain disability benefits or carers benefits past pension age which can reduce or eliminate their entitlement to a pension. However, the report points out that these reasons only explain a fraction of the ‘missing’ 250,00 pensioners.
“Retirement planning is key to make sure you have enough money for the lifestyle you want.”
LCP’s report is calling for a Government-led campaign to raise awareness to reunite people with their State pension, and ensure people claim what’s rightfully theirs. This could include local authorities and health services who deal with the over 80s making sure that they are taking up their entitlement to a State pension. Or even an automatic payment – at the moment the State pension still needs to be claimed, it doesn’t just start paying out.
Steve Webb, former pensions minister and partner at LCP said: “The Government needs to do much more to identify those who are on zero state pensions and to make sure that they draw the pension to which they are entitled”.
This is not the first time that the Department for Work and Pensions (DWP) has been in the spotlight for problems with State pension payments. One high profile case has been the £3 billion underpayment of pensions to around 200,00 elderly, widowed and divorced women.
The DWP has admitted fault and more than 74,000 married women are due a windfall of as much as £23,000, and widowed retired women will receive an average payment of £17,000.
Time to take action
It’s important to check with the DWP if you are being paid the correct amount.
Anyone that thinks they may be eligible to receive a State pension can find out how to apply at www.gov.uk.
For further information about over-80 state pension eligibility, you can visit www.gov.uk/over-80-pension/eligibility.
A State pension is of course just one element of the wider financial picture when it comes to retirement as it cannot be relied upon alone.Retirement planning is key to make sure you have enough money for the lifestyle you want.
A financial adviser can help provide the right path to financial security.