Hundreds of thousands of pensioners are in danger of missing out on more than £20,000-worth of benefits in retirement, as two new studies suggest that they are living longer but failing to claim all the state help and tax breaks available.
Customer research by equity release provider Just Retirement Solutions (JRS) has concluded that 18 per cent of pensioners who have never claimed state benefits are eligible for the pension credit, council tax discounts or some other assistance – while more than one in four who do claim are eligible for more. On average, JRS calculated that the average value of additional benefits to which retirees are entitled is now £675 per year. For those not claiming any benefits, the additional amount identified rises to £788 per year. In a small number of cases, JRS said the the additional benefits exceeded £2,400 in a year.
These figures follow last week’s publication of new longevity statistics by the Department for Work and Pensions (DWP), showing that 1.4m people aged between 51 and 65, plus 900,000 people already over age 65, are now expected to live to 100. Over the 35 years that they will spend in retirement, failing to claim the average £675 in annual benefits would mean missing out on £23,625. For those future centarians who do not claim at all, the total unclaimed rises to a potential £27,580, based on JRS’s estimates.
Even people retiring at age 65 who do not go on to live to 100 will spend an average of 20 years in retirement, according to DWP forecasts, suggesting that £13,500 may be going unclaimed by one in five eligible individuals.
Stephen Lowe, of Just Retirement said: “Since the beginning of the recession, pensioners have been hit financially by higher taxes, spending cuts and inflationary pressures. Considering these factors, it is disturbing that pensioners are not taking the state benefits that they are entitled to.
“For the majority of people, obtaining advice from an organisation or a person with an understanding of state benefits is the best way to ensure pensioners are not missing out on these valuable benefits.” JRS recommended consulting a Citizens Advice Bureau, www.direct.gov.uk, or a financial adviser. Lowe noted that JRS advisers start their advice process by reviewing customers’ state benefits entitlements, before discussing equity release options.
Funding retirement income is set to become more of a challenge for younger age groups as longevity increases. Forecasts from the DWP suggest that more than 3.3m people in the UK currently aged 16 and under can expect to celebrate their 100th birthday – more than over a quarter of that age group.
Commenting on the figures, Steve Webb, minister for pensions, said: “These figures really highlight how life expectancy in this country is changing – millions of people will be spending over a third of their lives in retirement.”
Advisers warn that savers are not taking account of this longer life expectancy when making pension contributions – and using it as an excuse to delay their investments. “Figures from the DWP, revealing that one in six of the population will live to be 100, were meant as a rallying cry for younger people to start planning for retirement,” said Fraser Smart, managing director of Buck Consultants. “In reality, however, the increase in longevity could present a double edged sword scenario for the long-running battle to persuade those at the start of their careers to consider long-term saving.
“While it ought to demonstrate that people can expect to live longer in retirement and therefore impose a greater urgency and need to accumulate more funds, there is a danger that recent key legislation changes, particularly the removal of the default retirement age, will actually lead to the reverse effect. As people face significantly longer working lives, many may be convinced that they can afford to delay the process of pension saving even further.”
Recent research from pension provider Standard Life research found that 24 per cent of savers are relying on inheritance to help fund their retirement, while 23 per cent are planning to rent out or sell a property and 10 per cent are planning to release equity from their main home.