Many young people are losing confidence in receiving a state pension when they are older, with many doubting that it will exist at all, research reveals.
According to financial provider Canada Life UK, one in seven (14%) people think that the state pension won’t exist by the time that they retire – rising to one in five (20%) of 18- to 24-year-olds.
Despite recent governments being wary of being seen as giving pensioners a poor deal, people think that this is likely to change.
The research found that 25% of people aged 18 to 55 think that the state pension age will be 70 by the time that they are eligible to claim it.
Just under one in three people (32%) think that it will still exist, but will provide only negligible income, while just over one in five (21%) think that it will be means-tested. Just under a quarter (24%) think that it will still exist largely unchanged.
The research has been published just as the state pension age for men and women has been equalised to age 65.
The state pension age for men and women will gradually increase from 65 to 66 from now until 6 October 2020. It is then due to increase to 67 by 2028 and 68 by 2039.
Under projections drawn up by the government Actuary’s Department, younger workers could face working until the age of 70 to qualify for a state pension.
Andrew Tully, technical director at Canada Life UK, says: “While people broadly think that the state pension will still exist in some form when they retire, it’s striking how many people, especially younger generations, have little confidence that it will be there at all by the time they retire.
“Some might say that it is unrealistic to expect state pension provision to remain static given that we are living longer and working longer. Our research suggests that people are being pretty pragmatic and are not banking on the state pension to support them in retirement.”
Young people also do not believe that the state will provide much for them either.
The research found that, on average, 18- to 24-year-olds expect that the state pension will make up around 27% of their retirement income, compared with an average of 42% among other age groups.
Despite the “triple lock” guaranteeing state pension increases, one in three UK adults who are not yet retired expect to receive a state pension of £150 per week – below the current full pension of £164 a week.
When it comes to how fair the current system is, 53% think that the state pension isn’t fair given how much they have paid in tax and National Insurance contributions, while nearly two-thirds of people (65%) think that they will put in more than they get out.
Andrew Tully says: “People appear to be ‘pricing in’ low expectations of the state pension that will be waiting for them when they retire, most likely because they see successive governments continually moving the goalposts, often with good reason.
“The success of auto-enrolment will hopefully begin to bridge the retirement savings gap, as people take control and appear to be moving away from a reliance on state provision. After all, private pension savings are one of the best protections against whatever decisions future governments may take on state provision.”
This article was originally written by our sister publication Moneywise.