• 80% of UK population don’t know how many years they need to pay National Insurance contributions for to receive the full state pension
• One in three people are completely unaware that taking long career breaks could mean they won’t qualify for the full state pension
In April 2016, the Government introduced changes to the state pension which mean individuals are required to have 35 years of NI contributions to qualify for the new state pension, five years more than the previous system, and those with under 10 years will receive no state pension payment at all.
With this in mind, UK workers need to be aware of how their working patterns could impact their income in retirement. However, a third (33%) of the 4,000 people surveyed are completely unaware that taking long career breaks, and not paying NI contributions, could mean they won’t qualify for the full state pension. This lack of understanding is particularly concerning given the numbers that could miss out; over half (55%) of the UK public have taken a career break of at least a year at some point in their life, and this rises to 61% when looking specifically at women.
Some 15% of people have taken time off work for maternity or paternity leave, 15% to bring up children, 14% have been away from work due to redundancy or forced unemployment, while another 14% have had to take sustained periods off due to medical reasons. While certain steps, such as claiming child benefit while bringing up children, will mitigate the impact of fewer years of NI contributions, nearly half (49%) of people don’t realise it’s possible to purchase extra credits to add years onto their national insurance contribution record.
Kate Smith, Head of Pensions, at Aegon UK says: “The fact that 80% of people don’t understand the potential implications of career breaks on their state pension just highlights 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.
“While it is encouraging that the Government is taking steps to rectify this unawareness, they really have just taken the first step on a long journey. 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 on whether they are on course for the retirement they aspire to.”
*Research sampled 3890 UK National representative people and was conducted by Watermelon Research between 29th February and 7th March 2016.
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