Poorest are most in need of pension reform, says Citizens Advice

30th November 2005

The Pensions Commission has presented a serious and positive blueprint for pension reform, national charity Citizens Advice said today. It urged the Government to accept the Commission’s recommendations in full.

Citizens Advice Director of Policy Teresa Perchard said:

"People on the lowest incomes are most at risk of poverty in retirement and are least able to save for their retirement, or to enjoy the benefits of a high quality occupational scheme.

“Millions of people will continue to face worsening levels of poverty in retirement if nothing is done to address the problems inherent in the current system. The choices available to people on low incomes are minimal. Many are daunted by the complexity of current arrangements, and have failed to apply for Pension Credit, despite large amounts of publicity. It is clear that most people will need to work longer and save more - an improved basic state pension will ensure that everyone can be confident of a decent income when they reach retirement. "

She continued:

"The National Pension Savings Scheme provides the guarantee of a state-backed pension scheme for all employees, but for it to succeed, there would need to be assurances that employers will contribute. In any move to create a National Pension Savings Scheme, there will be a real need for better access to financial advice and education to help people and employers to understand the options available and exercise an informed choice."

Currently, up to 1.7 million of the poorest pensioners go without vital income to which they are entitled, because of non-take-up of Pension Credit.

"The system is complex and confusing for older people,” said Teresa Perchard. “Some complexity is inevitable however, and any new system will have to continue to take account of the extra help with rent, council tax, and some other costs that older people on a low income are entitled to. Even with the Savings Credit, there is still very little incentive for the poorest people to save for retirement. An estimated 7.4 million people are no saving at all, and 4.8 million save only small amounts."

Citizens Advice also called for a review of the way the pensions and benefits system treats even low levels of savings and capital.

Last updated: February 22, 2007