Career breakers risk missing out on state pension
People who have taken career breaks are in particular danger, the research from Aegon suggests.
A staggering 80% of people do not know how many years they need to pay National Insurance (NI) contributions for to receive the full state pension and one in three aren’t aware career breaks could mean they won’t qualify for the full amount.
The findings come as the government prepares to contact 100,000 people who risk completely missing out on the new state pension.
Under the new rules, which came into force in April, a pensioner needs to have 35 years of NI contributions to qualify for the full state pension, five years more than the previous system. Anyone with fewer than 10 years will receive no state pension at all.
The Aegon report said workers need to understand how working patterns could impact their income in retirement.
Over half (55%) of the UK population have taken a career break of at least a year at some point in their life. Among women, this figures jumps to 61%.
Some 15% have taken time out for maternity or paternity leave, 15% to bring up children, 14% have been made redundant, 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 of people don’t know it’s possible to purchase extra credits to add years onto their NI records.
“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.”
You can check your National Insurance record by applying for a statement here.