Why don’t those poor and old claim their benefits?
It’s benefits not savings that top up the in retirement income of millions of British citizens, but the amount of time devoted to benefit take-up (as compared to savings rates) is minimal
Just (Retirement) are one of the few financial services companies focussing purely on how people retire. They are one of the very few who think about retirement not just from a financial services point of view (the monetisable bit) , but from the benefits point of view (where the financial services industry is not involved).
Just keep us informed of what is (or isn’t) happening in the benefits world and they’ve recently produced some research which is challenging assumptions that benefit coverage amongst our older population is “universal”.
According to the latest numbers produced by Government , 94,000 less people claimed pension credit last year than the year before. This is probably because of a rule change
In May 2019, the eligibility for claiming Pension Credit in a couple changed from being determined by the age of the older person in the couple to being the age of the younger person in the couple.
That means many couple are now receiving less generous benefits until the second partner reaches his/her state retirement age. “Less” could mean up to £7,000 pa
This rule change is estimated to be saving Government around £1.1bn a year going forward, a small part of the £120bn benefits budget but a significant loss to many claimants.
It was possible to avoid slipping back into universal credit by claiming pension credit when you could, Age UK and many other organisations campaigned to get people to claim pension credit while they could but this brings us onto a much larger problem.
Older people are rubbish at claiming their benefits
46% of eligible pensioner homeowners are failing to claim any State benefits and a further 18% are claiming but receiving less than they are entitled to, according to the latest research from Just Group.
The data shows that those failing to claim anything are each missing out on an average of £1,423 a year per household while those receiving too little are under-claiming by £2,102 a year.
According to Stephen Lowe, a Director at Just
“The low level of take-up for some of the key benefits raises serious questions about the support being given to help people navigate the complexities of the benefits system.
“One of the first tasks of the adviser is to check customers’ entitlement to benefits. Of those eligible for State support, we found nearly two-thirds were missing out made up of 46% failing to claim anything and 18% claiming something but actually entitled to more.
“The highest amount being missed was £13,660 a year extra income due to a customer in Suffolk who was already receiving help with Council Tax but missing other key benefits. Another customer in Dorset who was failing to claim any benefit was entitled to £9,195 a year income. Overall, more than half of those missing out on some or all benefits were entitled to at least £1,000 a year or more.”
So where is the problem?
Let’s be honest, ,most financial advisers do not seek out those on benefits, they are primarily wealth managers and if they are “financial planners” , they expect to be paid either by fees from the client or from their savings. Benefit claimants are low on wealth, have little savings and don’t have budgets to pay adviser fees.
So where do people get help? They get it from under-resourced job-centres, under-staffed Citizens Advice Bureaux and from charities like AgeUK. There are online resources such as Moneysavingexpert.com and specialist services such as Entitledto.co.uk or Turn2us.org.uk. All these charitable and private services are free but they have limited human resources. They are no Pensions Wise.
When those who do advise on benefits were asked where the problems is, they told Just that , 79% of people are failing to claim the benefits they are entitled to because there is a lack of information about what’s available and 41% believe the application process is too complicated.
29% said there is an assumption that being a homeowner means you are not entitled to any benefits and 21% believe there is still a stigma surrounding benefits claimants.
And yet we have a national Money and Pensions Service ….
Here is MAPS strategy for our next ten years
The document relentlessly focuses on making people into savers and better at reducing debt. Nowhere in the document does it talk about benefits – other than as a side issue. Take this example where the paper focusses on those who are financially excluded
The “some claim benefits” statement is one of the very rare occasions when the paper touches on the £120bn benefits spend. The statement suggest failure, the vision for 2030 is of a nation financially empowered where “none claim benefits”.
Life is not like that – vulnerable people usually stay vulnerable
I know people on benefits, my youngest brother life is based on benefits, he can work 15 hours a week but cannot earn beyond the minimum wage. He has a lot of issues and the state recognise them, he doesn’t see himself being sufficient soon.
I know people in the City who are permanently homeless and spend most nights a few yards from my door. One of them has been sleeping in our area for over a year. He is happy to talk to me about his life but he is not expecting it to be a long one.
Those who get on pension credit or move to universal credit and are in their sixties are unlikely to work again. The best they can do is make sure they claim what they can and – if they have private income and savings – ensure that it does not knock out their entitlements.
Last week, the DWP launched a campaign to encourage members of the public to check whether they are entitled to receive the benefit by using an online benefits calculator to find out if they are eligible.
Good as this and the Entitled to Calculator on MSE are, they are not able to replace the help of humans (nor do they explain the impact on benefits of savings and income). The work done on this by Gareth Morgan is accessed only by advisers selling equity release products.
Guy Opperman, minister for pensions and financial inclusion, said in Feb 2020
“We’re keen to get the message out there that everyone should claim the benefits they’re entitled to and I would encourage anyone that thinks they might benefit from pension credit to check.”
But according to Just ,
“The low level of take-up for some of the key benefits raises serious questions about the support being given to help people navigate the complexities of the benefits system,” he added”.
and in a written statement to the Commons in 2019, the pensions minister explicitly stated
Pension Credit was designed to provide long-term support for pensioner households who were no longer economically active.
Is housing income going to drive change?
The only reason that the private sector is likely to advise on benefits is when they have to. There is one fast-growing sector of the market where this is happening and it is in the mortgaging of people’s houses to raise capital and income in later life. This is variously known as “equity release, home income plans or lifetime mortgaging”.
Before such a course of action can be recommended (and executed), advisers (who can earn 0.75% on the sum borrowed) need to advise on the impact of taking on debt – on benefits.
78% of households headed by someone aged 65+ are owned. Of these older adult homeowners, just 6% are still paying a mortgage. If the trend towards unlocking equity in these houses continues then (surprisingly) , financial advisers working on equity release may come to the help of Guy Opperman’s campaign to improve later-life benefit take-up.
But is this really the way to improve things – and what of the 22% of households where older people are renting?
Should MAPS step up to the challenge?
Take up of benefits in retirement is very low
These are the latest figures collated by AgeUK which support Just’s and the DWP’s research on take up.
- An estimated 40% of families in Great Britain who were entitled to Pension Credit did not claim it (approximately 1.2 million families)
- Around £3 billion of Pension Credit was unclaimed
- .The average (mean) weekly amount of Pension Credit that went unclaimed was £49 a week .
- An estimated 16% of pensioners in Great Britain who were entitled to Housing Benefit did not claim it (approximately 340,000 older people)
- .Around £750 million of pension-age Housing Benefit went unclaimed
Somebody needs to do something about this and the one arms-length Government Agency that has the resource to do so is the Money and Pension Service
In MAPS business plan 2019/2020 there is plenty about private pensions , debt and general guidance on money management but nothing about benefits.
The £118m budget MAPS had last year is not targeted at helping people with benefits, it’s targeted at keeping people off benefits
Among Guy Opperman’s many duties is to ensure that the MAPS budget is targeted in future where the problem really is.
While initiatives that get more people saving for retirement are going well, we all know that many people will not save enough for retirement to stop work and will need to rely on benefits and the state pension for a basic lifestyle.
Targeting better saving and debt management amongst working people will not help those people for whom work and pensions savings are over.
Surely it is time to MAPS to the task of ensuring that the shamefully low take-up of pension credit (and increasingly universal credit) is improved – taking people out of old age poverty.
Currently Pensions Wise does not deal with benefits – it should. There should be a benefits claiming service within MAPS that people could contact as they contact TPAS.
Money should be earmarked for these things from budgets on “strategy and insight”. MAPS needs to be of more practical help.
It is not enough to rely on Just and others in the private sector to do this job. We need MAPS, mostly funded as it is by the private sector , to step up to this particular plate.
I one hundred per cent agree that for many people, particularly vulnerable people, the system to find out whether or not they can claim benefits, and if so HOW they apply, is very unhelpful. I must respectfully disagree with the solution proposed. The problem is not that people do not get the help they need to receive state benefits. The problem is the complicated system itself. The Pensionwise appointment is getting more and more comprehensive, to the extent where people using the service will switch off if significantly more content is added. The point of Pensionwise is to help people understand the options they have when they come to take their DC benefits at any age after 55 (although the service is available to over 50s rather than just over 55s). The point of Pensionwise is NOT to explain the tax system or the benefits system. I believe that you are misguided in thinking that Pensionwise is the right service for making people aware IN DETAIL of the benefits they could maybe claim. What Pensionwise does instead, is to make people who are already on benefits or about to claim benefits aware that the crystallisation of benefits could reduce the benefits they are currently receiving or reduce them. As part of Pensionwise, where relevant, customers are actively encouraged to contact the benefits office paying their benefits or the Citizens Advice Bureau before they take money out of uncrystallised pension pots. The problem could well be that when the Pensionwise customer approaches the Benefits Office or CAB office they do not then get the information, help and advice they so desperately need. The solution is therefore a combination of making the benefits system fairer, clearer and more accessible to all, and to increase the resources of CAB and other guidance providers. Where I thoroughly agree with you is that there is a major problem for people not knowing what to claim or how to claim. It might be that MAPS could offer a solution in future, and I would be very surprised if the newly created challenge groups do not consider what the involvement of MAPS should be in this area. but Pensionwise is really not even remotely the correct way to help.
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