A recent study has stated that around 6.1 million people could fail to obtain the full amount stipulated in the state pension because they havenít paid into it for the required amount of years. The demographic that the study pertains to is 40 to 65 year-olds.
The study informs that 39% of women and 14% of men in that demographic will miss the 30 years of contributions necessary to receive the full pension, though there are methods in which they can retrieve these contributions such as paying additional National Insurance levies. The average employee in the UK is predicted to be in full-time employment for 37 years.
The number of people unable to claim the full amount is likely to eventually increase considering the fact that the qualifying years is set to rise to 35 years in 2016. However, this only pertains to those starting their career with older workers being tapered into the new scheme in coordination with their pre-existing record of employment.
At present the basic weekly pension is at £113.10 and this is to rise in a few weeks to £115.95. However, this is part of a plan to gradually phase out the old system and have it entirely substituted with the new one by April 2021. The new one will see a ìflat rateî pension scheme falling between £144 and £155 per week on the condition that these pensioners have paid National Insurance contributions for a total of 35 years. Also, they will have to prove that they did not choose against the second state pension.
The report reveals that those most likely to be affected are workers who left their employment in order to raise their children and also employees who suffered from a long-term disease. Data shows that 10% of workers have taken time away from employment in order to aid a family member whilst 11% left for educational reasons.
Furthermore, data shows that particular regions are likely to suffer more than others. The proportion of 40-65 year-olds who have been in employment for less than 30 years is lowest in London at 19% whilst highest in Wales at 35%. The regions of North East and North West have a high proportion at 30% and 32% respectively, whilst Yorkshire has a relatively low rate at 22%.
Andrew Megson works at Partnership, the firm who oversaw the study, and he stated: ìWhen people plan their retirement finances, many assume that they will be eligible for the full state pension. However, almost a third have not worked for the 30 years required and if they have not taken any action to ensure they either make voluntary contributions or receive the relevant credits they may well face a nasty shock in retirement.î
He went on to argue: ìOthers who opted out of the state second pension may also find that the support that they receive from the Government is less than they hoped. Therefore, it is vital when planning your retirement finances to ensure that you not only understand how much you will receive as part of the state pension but consider making up the shortfall if at all possible.î
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