Thanks to automatic enrolment, more people than ever are planning for their retirement and getting their personal pension provision on track. But what about their state pension? Many people rely on this form of income and see it as a given, but unfortunately, a worrying proportion could end up missing out.
Lack of NI awareness
Research from Aegon has highlighted a clear lack of awareness when it comes to National Insurance (NI) contributions, particularly among those who have taken career breaks, with many at risk of not qualifying for the new state pension.
The figures show that 80% of respondents don't know the number of years they need to make NI contributions for in order to qualify for the full £155.65 a week, with 57% underestimating the number of years needed. A further 33% were unaware that taking long career breaks – and not paying NI contributions during that time – could mean they won't qualify for the full amount, a finding that's particularly concerning given the number that could miss out: over half (55%) have taken a career break of at least a year at some point, rising to 61% among women.
Indeed, 15% of respondents had taken time off work for maternity or paternity leave, while 15% had done so to bring up children. A further 14% had been away from work due to redundancy or forced unemployment, and the same amount have had to take sustained periods off due to medical reasons – yet 49% of people didn't realise that it was possible to purchase extra credits to add years onto their NI contribution record.
Know your future
All these gaps could take their toll, particularly as the Government has recently made changes to the system: now, individuals must have 35 years of NI contributions to qualify for the new state pension – five years more than previously – and those with fewer than 10 years of contributions will receive no state pension payment at all.
Kate Smith, of Aegon UK, said the findings "highlight the sheer scale of the task ahead to properly educate people about the new state pension. We already know that millions of people simply don't know how much they are set to receive, and these new statistics should ring alarm bells.
"To ensure no-one loses out, every individual in the UK should be contacted and provided with an estimate of the state pension they are on target to receive – this will start to clear the widespread confusion and prevent people getting a nasty shock when they do reach state retirement age. This approach will not only force people to engage with their pension more often, it may also prompt them to review their private provision and in doing so, take stock of whether they are on course for the retirement they aspire to."
Don't lose out – make sure you know the retirement income you're likely to achieve by heading to Gov.co.uk, and stay on track with your personal pension by making sure you're enrolled.
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