Over the last few months, I have been researching welfare benefits entitlements in the UK. (You can see all my earlier posts by clicking on “Welfare Benefits” in the TAG CLOUD).
The first question was about who received the “State Pension”. Needless to say everybody answered that with a resounding “YES”. You might assume from this that everybody gets about the same from the state to support themselves in retirement. That would be a big misjudgment because the pension system is far more complex and doesn’t end up with an easy numerical answer for all.
So I asked a simple follow-up question to the group. How much did they think they received in state pension each week? Their answers are summed up in the graph below.
I said when I first published this survey that the State Pension, which everybody said they received, should be fairly straight forward to understand. Firstly, there is an “old State Pension” which is currently £125.95 per week. Secondly, there is a “new higher State Pension” which is £164.35 per week, but only applies to new pensioners. In the survey group, nobody would be eligible for this new pension as they had all been pensioners for some while. Therefore you would expect them to receive something around the old pension level of £126 per week. So how do you explain the above graph?
- Have they correctly remembered the amount they receive?
- Is their State Pension topped up with Pension Credit?
- Are they adding other occupational pensions into this figure?
- Most importantly, do they know how their State Pension has been calculated?
Undoubtedly the variation in these figures is related to the level of National Insurance contributions they made during their working life. But on top of that, you have to factor in other issues, like whether they paid a Married Woman’s Stamp, whether they contributed to the State Earnings Related Pension Scheme and whether they deferred taking their pension.
Basically, the Pensions Service says “trust me”. But in a system as complicated as this that has changed frequently in the years gone by, how can you be sure that they get it right every time? If you have a comprehensive grasp of this issue when you retire, you may be able to challenge the determination, but I wonder how many people do this. I suspect that most people accept the figures they are given without question.
I have no reason to doubt the accuracy of the Government’s figures but for many people setting aside money for a pension (alias National Insurance), this will be the biggest investment they will make in their life. Therefore you would hope the system would be transparent and easy to understand.
The reality is the frequent changes that have been made to the State Pension system over the years, the constant renaming of benefits titles and the frequently hollow unfulfilled promises of politicians, do not inspire you with any great confidence.