12 May 2021
According to latest population estimates there are 8.78 million people in Great Britain aged seventy or over, but only 8.53 million receiving a state pension – a difference of a quarter of a million people. A new report from consultants LCP looks in depth at these quarter of a million ‘missing pensioners’ and asks if it is really the case that none of them should be getting a state pension.
The report points out that there are several legitimate reasons why not everyone aged 70 or above would be expected to be getting a state pension:
- Long-term deferral – it is not mandatory to take a state pension at state pension age; some people choose to defer for several years, particularly if they plan to continue in paid work; although the vast majority of people claim by the time they are 70, a small number will still be deferring into their 70s;
- Major National Insurance gaps – the state pension (at least up to age 80) is a ‘contributory’ system; for this age group (who are covered by the ‘old’ state pension system), those with a contribution record covering less than 25% of their adult life might get zero basic state pension in their own right;
- Receipt of other benefits instead – a relatively small number of people receive certain disability benefits or carers benefits past pension age which can reduce or eliminate their entitlement to a retirement pension.
However, the report points out that these reasons only explain a fraction of the ‘missing’ quarter of a million pensioners. This is for two main reasons:
- There is no evidence that the proportion of ‘missing’ pensioners declines with age; this suggests that people deferring into their early 70s but claiming in their late 70s is not having much effect on the figures;
- Even those with a very poor NI record in their own right can access a state pension through one of two routes:
- Married women can claim a 60% basic pension based on their husband’s contributions, so unless the husband also has a nil pension, the wife should be able to get something;
- From age 80 onwards, the UK has a *non-contributory* state pension where the amount you get does not depend on your NI record; yet there are still large numbers of over 80s with zero state pension;
The following is a case study for the first of these groups – a married woman aged 73 who was until recently on zero state pension but could have been on over £4,000 per year:
The report then focuses on the over 80s (or ‘Category D’) state pension. The rate of the Category D pension is currently £82.45 per week or over £4,000 per year. Apart from needing to be aged 80 or above, the *only* test for eligibility is a simple residence test. The gov.uk website (www.gov.uk/over-80-pension/eligibility ) says that you need to satisfy two tests:
- you were resident in England, Scotland or Wales for at least 10 years out of 20 (this does not have to be 10 years in a row) - this 20 year period must include the day before you turned 80 or any day after AND
- you were ‘ordinarily resident’ in the UK, Channel Islands, Isle of Man or Gibraltar on your 80th birthday or the date you made the claim for this pension, if later
These rules mean that someone who was living in the UK (or moved to the UK) before their 70th birthday and did not move away in the following ten years would be eligible for a Category D pension at age 80.
However, the LCP report finds that there are around 107,000 people (65,000 women, 42,000 men) in Great Britain who are aged 80 or over but have zero state pension *despite the existence of a non-contributory state pension for this age group*. The report’s authors believe that a large proportion of this group could make a successful claim for a Category D state pension if they were aware of it. If 100,000 people aged 80 or over claimed their £82.45 per week, this would cost over £400m per year in extra state pension payments.
A key point is that for those who were previously on a *zero* state pension, the upgrade to the Category D pension rate does not happen automatically at age 80 – a claim has to be made.
Possible reasons why this age group are not claiming include:
- lack of awareness – “no-one has heard of the Category D pension”
- language barriers – not having a National Insurance record may be associated with entering the UK from overseas later in life, and some of this group may not have English as a first language; this may further reduce awareness and/or increase barriers to claiming;
- practical barriers – if someone has come to the UK from overseas there could in some cases be issues around home country documentation not being accepted in the UK, and there could also be cases where people have never needed to obtain a National Insurance number and so could face additional barriers to claiming.
- Mental capacity – with increased age may, for some, come reduced mental capacity and ability to cope with issues such as claiming pensions and benefits;
The report recommends a focused campaign to raise awareness amongst older people not getting a state pension. This could include local authorities and health services who deal with the over 80s making sure that they are taking up their entitlement to a state pension. It could also include targeted media activity in outlets most likely to be seen by those who have migrated to the UK during their working life and who are now retired.
A more radical reform would be to remove the need for a claim at age 80 and to pay Category D pensions automatically, without a special claim. For older people with cognitive impairments in particular, removing the need to complete a claims process could remove an important barrier to people getting what they are entitled to.
Commenting, Steve Webb, partner at LCP said:
“It is shocking that there are so many older people who are getting no state pension at all. In particular, when we have a special state pension payable to those over 80 which does not depend on National Insurance Contributions, it is hard to understand why over 100,000 people over 80 are still on zero pensions. The Government needs to do much more to identify those who are on zero state pensions and to make sure that they draw the pension to which they are entitled”.
For more information for those with no state pension click here.