New Flat Rate Pension Scheme Highlights Pensioner Benefit Gap

05 April 2011

Government state pension reform plans are good news for pensioners - but the 10 million who are retired or will have retired when the new plans come into effect by 2015 or 2016 still need to maximise retirement income, leading independent equity release adviser Key Retirement Solutions warns.

Key Retirement Solutions welcomes the Government new flat rate pension scheme, but has stressed that pensioners are still no better off than before, as they struggle to supplement their income.

Around 600,000 people retire each year and will have to rely on the current mix of State pension and benefits before the new flat rate scheme comes into effect.

The current full state pension is £97.65 a week, but can be topped up to £132.60 with pension credit. Due to the complexity of the old system, more than one and a half million* eligible pensioners do not claim pension credit each year and around £5 billion in benefits goes unclaimed.

Under the new scheme, this could be replaced by a new £140 flat rate, with inflation expected to push this up to £155 by 2015 or 2016.

Dean Mirfin, Group Director at Key (www.keyadvice.co.uk), said: "This announcement is great news for future pensioners who will no longer face the complexity of the old system in their effort to gain what they are entitled to.

"Although under this reform, not only will 10 million people who have already retired be excluded from the new deal, but actuaries say many other people still at work will not live long enough to enjoy its benefits.

"Whilst this will simplify the future claims process, pensioners will still struggle to enjoy a good quality of life due to a lack of available income. We are currently seeing a steady increase in pensioners looking towards equity release to supply that much needed income, and we anticipate that this will only increase."

The equity release market saw a rise in the number of plans sold in 2010** with more pensioners opting for drawdown products which will enable them to live comfortable lives in retirement.

Anyone looking to release equity from their home can request an independent guide to equity release by calling 0800 531 6010 or by visiting www.keyadvice.co.uk/equity-release/request-a-free-guide

Notes to Editors

*http://www.bbc.co.uk/news/business-12954888

**KRS Equity Release Market Monitor 2010