For the under-pensioned – savings is only half the story.

Gregg mc

Peoples Pension are building a fabulous business out of auto-enrolment which will help future generations to get better pensions and so enjoy more security in retirement.

Gregg McClymont, who runs policy at People’s Pension, is concerned about the pension gaps

With the average pensioner from an ethnic minority is £3,350 a year worse off than other pensioners, this 24.4% gap in retirement income must be closed. Read on for why the divide has formed and how we at The People’s Pension think government can work to hashtag CloseTheGap.

People’s solution is for Government to lower the auto-enrolment earnings threshold

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This would help in two ways: it would increase the pensions from People’s pots and it would make the pots People manage more viable to manage. I support People’s Pension and other large master trusts that are providing the essential service to low-earners and have no problem with Peoples aligning social policy with commercial policy.


But there’s a ready-baked solution for this problem

A lot of the work done by People’s and NEST (who are testing  the sidecar savings system) revolves around getting low earners to save more.

But we shouldn’t forget that the Government has already created savings schemes that help low-earners save more and get more in their retirements because they have less.

Collectively these measures are called pension credit,

One part of pension credit is the Government’s “help to save” program which allows low-earning people to get 50p from the Government for every £1 they save. The details are here.

As well as Savings Credit, people can get Guaranteed Credit which together means that Pensions Credit can be quite valuable

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I’m worried about how low the take up of pension credit is. If you go on the MAPS website  you see how complicated it is to work out if your are eligible for pensions or savings or universal credit.

But if you are eligible – you get a top-up to your savings which means you don’t have to save more to #closethegap

This is what AgeUK  has to say

If you’re eligible, Pension Credit will not only give you a bit of extra cash, it could also help you get other benefits too:

  1. It’s unlikely you’ll have to pay Council Tax (unless other people live with you).
  2. You’ll get free NHS dental treatment, and you can claim help towards the cost of glasses and travel to hospital.
  3. You’ll get a Cold Weather Payment of £25 when the temperature is 0°C or below for 7 days in a row.
  4. If you rent your home, you may get your rent paid in full by Housing Benefit.
  5. If you own your home, you may be eligible for help with mortgage interest, ground rent and service charges.
  6. If you’re a carer, you may get an extra amount known as Carer Premium, or Carer Addition if it’s paid with Pension Credit. This is worth up to £36.85 a week.
  7. If you’re over 75, the BBC has announced that from 2020 you’ll need to be claiming Pension Credit to get a free TV licence.

You have nothing to lose by applying, but potentially a lot to gain, and even if you’ve previously been turned down, it’s always worth making a new claim every year.

Age UK has a range of benefit calculators on its webpage which help people understand their entitlements.


What we need

The People’s research is excellent, it digs into the reasons why some ethnicities get more out of AE than others (did you know that twice as many UK Pakistanis/Bangladeshis are self employed than UK Indians?)

However it only looks at the picture from one point of view. Unfortunately what you can get from your pension pot, (even if you aren’t drawing on it) can reduce your entitlement to Pension Credit, especially if you are a pensioner and your partner isn’t.

We need a service that goes beyond entitlement to include disentitlement. Those on pension credits can lose them if they manage their savings the wrong way.

The complex interactions between savings and benefits are blogged about by my friend Gareth Morgan.  I want to work with Gareth in coding his calculators so that they can be available to people working out their AgeWage and how best to take it.

It would be good to bring together those who understand pensions through the lens of saving and those who understand savings , through the lens of benefits.

UC

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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