Pensioners are leaving £2 billion in state benefits unclaimed due to welfare stigma or lack of knowledge about entitlement, the National Audit Office has said.

More than a million older people are missing out on benefits to which they are entitled, reports the spending watchdog which concludes that complexity of the system is one of the main deterrents to getting the pensioners to claim the money they should be receiving.

In a separate report, the National Consumer Council says that consumers are being forced to cope with a system where neither the changing rules nor the shifting odds of pension saving have been properly explained.

Forum Response: National Consumer Council

Deirdre Hutton, chairman of the NCC, said: "Our report points out that ensuring a decent income in retirement is risky at the best of times, but several new factors - longer life expectancy and recent stock market falls for instance - are increasing the risks.

"As more employers ditch final salary schemes and government piles on the changes to state pension provision on the one hand, while encouraging more private pension saving on the other, more risks and complexity are being shifted onto the shoulders of individuals.

"This is happening without any discussion with consumers. Even worse, it is being allowed to happen despite evidence of little public understanding of pension issues and amid widespread public fears for their retirement income prospects."The combination of pensions complexity, uncertainty and poor understanding can too easily breed confusion among consumers - a sure-fire recipe for inertia. Low-income consumers are especially vulnerable to pensions complexity and the uncertainty of future public policy changes.

" For instance, those who have only been able to save a little may lose out on means-tested pension top-ups."

Forum Brief: Counsel and Care

Martin Green, chief executive for Counsel and Care, told ePolitix.com: "What we need is a proper high profile campaign to highlight the benefits available.

"We also need a coordination of the information we hold and we need to use that to deliver benefits to older people. We need an end to claiming benefits and need to move towards a new approach for claiming them."

Forum Response: Help the Aged

A spokesman for Help the Aged told ePolitix.com: "Help the Aged warmly welcomes the report from the National Audit Office. The current system of means testing pensioners often excludes the very people it is designed to help.

"By placing the onus on pensioners to claim means tested benefits, the government places barriers in their way, which are plainly proving insurmountable for a large section of the pensioner population. Indeed, instead of providing a solution to pensioner poverty, the government could be seen to be contributing to it.

"Up to 770,000 older people currently do not claim the Minimum Income Guarantee (MIG) to which they are entitled. This figure is set to grow, with the introduction of the Pension Credit next year, to as many as 1.5 million people.

"In addition, there is a clear risk that the new Pensions Service will be overwhelmed by the fact that, from April next year, half of the pensioner population - over 5.5 million people - will be subject to means testing.

"The government must heed the recommendations of this report and recognise that it provides a clear framework for action that must be taken to ensure that older people receive the benefits that they deserve. In particular, the government must simplify applications for all benefits, not just the MIG.

"The Pensions Service must work positively with voluntary and community groups who have direct contact with older people. A special effort must be made to identify hard-to-reach groups, such as ethnic minorities, who have additional barriers to overcome.

"There is a very real danger that much of the extra money that the government boasts of providing for pensioners will go to pay for the administration of an increasingly complex benefits system while vulnerable older people continue to fall through the net."

Forum Response: Age Concern England

Gordon Lishman, director general for Age Concern England, said: "This is further evidence that money isn't getting to the poorest older people. Hundreds of thousands of older people who are currently eligible for the Minimum Income Guarantee do not claim, put off by stigma or because they do not understand their pension rights.

"Many older people who fail to claim benefits do not have enough money for essential items such as food and transport. The government must commit to ambitious targets for take up that increase significantly year on year, and to take special measures to reach the very poorest and hardest to reach older people.

"Ultimately we should be working to achieve a 100 per cent take up by the five million older people who will be eligible for Pension Credit next year. What is also needed is an increased basic state pension to cover basic living costs and allow an active and healthy lifestyle."

Government Response: Department for Work and Pensions

A spokesman for the Department for Work and Pensions told ePolitix.com: "This government has massively increased the amount of money available to pensioners - an extra £6 billion a year since 1997.

"By the time the Pension Credit takes effect next October, pensioner households will on average be over £1150 a year better off, and the poorest third of households over £1500 better off since 1997.

"Through Pension Credit alone it is estimated that 4.9 million pensioners (or 3.8 million pensioner households) stand to gain, on average, £400 a year, with some getting up to £1,000 a year.

"Getting as many pensioners to claim money that they are entitled to is a key priority for us. In particular we have targeted help at the poorest pensioners.

"In 2000 we launched the biggest take up campaign ever which resulted in over 140,000 pensioner households being on average £20 a week better off. We also set up a tele-claim centre so that pensioners could claim MIG over the phone. In 2001 a shortened MIG claim form was introduced - slashing the form from 40 to 10 pages

"We continue to pursue a diverse range of initiatives to encourage take up of benefits. For example, our Pensioner Guide, that brings together useful information on a huge range of government benefits and services, has been delivered to pensioners in rural areas by the WRVS meals on wheels service in the last few weeks.

"In addition by bringing together pension-related services together in the new Pension Service customers now receive a dedicated service delivered in a way that is convenient for them - dealing with queries accurately and efficiently. Pensioners deserve a decent modern service tailored to their needs."