Poorer pensioners caught in terrifying financial struggle

interactive investor comments on the Age UK cost-of-living report.

interactive investor comments on the Age UK cost of living report, “Tackling the cost-of-living crisis: what the government must do”.

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Alice Guy,Head of Pensions and Savings at interactive investor says: “The last few years have been terrifying financial struggle for many older people, who are often facing health problems and have limited scope to increase their income.

“Many pensioners have no resources beyond the state pension. Pension auto-enrolment only started in 2012, and many of today’s pensioners worked for over 40 years with no private pension to show for it.

“Many older pensioners also receive a lower state pension because a different system was in place before 2016, meaning they receive a maximum of £156 each week rather than £203 each week with the new state pension. Many pensioners also had gaps in their National Insurance record and therefore aren’t receiving the full state pension.

“The cruel reality of the cost-of-living crisis is that many older people are struggling to heat their homes and put food on the table.

“The truth is the state pension is simply not enough to meet many pensioners’ needs. The full state pension is only £203 per week, but the average pensioner household aged 65-74 spent £455 per week in March 2022, leaving a gaping hole between many pensioners’ costs and income.”

Here are some steps poorer pensioners can take if they’re struggling with their finances:

Alice’s tips:

1. Get help – Look for help with your finances either online or in person. The Age UK website has information on how to manage on a squeezed budget and also has links to local debt advice and debt advise charities such as StepChange. A debt adviser can help you create a budget, work out what you’re spending and see if you can increase your income or reduce your bills. They can also give you advice on speaking to creditors as some creditors may agree to a repayment plan or temporarily stop charging interest.
2. See if you can increase income – Check if you’re claiming everyone you’re entitled to using Turn2us or Entitledto. Around 850,000 pensioners are entitled to pension credit and currently aren’t claiming. Pension credit will top up your income to £201 each week for single pensioners and £307 each week for a couple. Pension credit also opens the door to other benefits such as housing benefit, cost of living payments and a reduction in council tax.
3. Try to reduce costs – Checking what you’re entitled to may also help you reduce your costs as you may be eligible for extra help with energy costs, housing, or council tax.
4. Talk to your bill provider – Speak to your mortgage company or bill providers as they may be willing to agree a repayment plan or offer support.
5. Consider paying voluntary National Insurance contributions – if you have gaps in your National Insurance record and don’t receive the state pension, it may be possible to pay voluntary National Insurance contributions to increase the amount of state pension you receive. It costs £907 to buy one extra year of National Insurance contributions, which could give you an additional state pension of £303 per year so it could only take around four years to recoup the extra amount you pay.