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The state pension provides a “bedrock” for income in retirement however Britons are warned that the income alone cannot attain a reasonable standard of living in retirement.
New research showed that 41 percent of people expect to have a “bad income” in retirement, as well as working way until their 70s.
Most people believed that the responsibility for ensuring people have incomes for a reasonable standard of living in retirement is the responsibility of the state, individuals and employers combined.
Jonathan Cribb, Associate Director at IFS and one of the Directors of the Pensions Review, said: “A challenge for people trying to formulate a good retirement saving plan is the difficulty understanding how the pensions system works.
“Despite the UK’s state pension now being much simpler than in the past, there is an incredibly low understanding of the level of the state pension or how it is likely to increase over time, although there is better understanding of the state pension age.”
New research released today, as part of the Pensions Review, a multi-year partnership between the Institute for Fiscal Studies and the abrdn Financial Fairness Trust, finds widespread pessimism about living standards in retirement amongst working people.
Around 73 percent think “the current state pension does not provide enough to attain a reasonable standard of living in retirement”.
On the other hand, nearly 60 percent admit to not knowing what the state pension actually pays. And of those who think they know; many wildly underestimate the sum.
In order to begin planning for retirement people may want, experts explain it is important to check how much state pension one will get.
The full amount of the new state pension is currently set at £203.85 a week.
This normally goes up every year. The amount someone receives depends on how many years of National Insurance contributions they have made or been credited with.
People can find out how much they are likely to get by getting a state pension forecast.
If someone has gaps in their account, it could lead to them getting less than the full amount.
Checking for gaps, and filling them where possible, may be worthwhile in order to boost one’s income in retirement by thousands.
To get any state pension at all, a person will usually need at least 10 qualifying years.
For the full new state pension, for instance, a person generally needs at least 35 qualifying years, while a person typically needs 30 qualifying years for the basic state pension.
The UK Government recently announced that taxpayers now have until April 5, 2025, to fill gaps in their National Insurance (NI) record from April 2006 that may increase their State Pension – an extension of nearly two years on the July 31 deadline.
Karen Barker, Head of Policy and Research at abrdn Financial Fairness Trust, said: “Many are fearful about their future retirement, with five million expecting to retire in their 70s and 4.5 million not expecting to retire at all.
“This may be because few are confident the state pension is sufficient to provide a decent standard of living or that it will even be with us in future decades. The public acknowledge the vital role of the state in providing a secure future, their own responsibility towards providing for their retirement, and the contribution made by their employer.
“A key question for the Pensions Review is where future funds may come from to ensure that today’s working age individuals have good retirement outcomes.”