Jeff Salway: Nasty pensions shock looms for thousands

Prime Minister David Cameron and with pensions minister Ros Altmann, who was forced to admit the deal was mis-sold by the government. Picture: Peter Macdiarmid/Getty Images
Prime Minister David Cameron and with pensions minister Ros Altmann, who was forced to admit the deal was mis-sold by the government. Picture: Peter Macdiarmid/Getty Images
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It’s now just a matter of days until the new single-tier pension, first unveiled in early 2013, becomes reality.

Astonishingly, and alarmingly, many of those directly affected by the transition have been given no idea what to expect from their state pension. What we do know for certain is that the government has made a pig’s ear of communicating the changes, and that an awful lot of people are in for a nasty shock as a result.

The abject failure to set out clearly the implications of the biggest state pension reform in decades is little short of a scandal.

When I wrote about this a year ago I was told by the Department of Work and Pensions (DWP) that I’d been unfair and that it was getting its act together. Of that there has been little evidence.

Just how badly the changes have been managed is underlined by two new reports. The first, from the National Audit Office (NAO), focuses on the impact on people with guaranteed minimum pensions (who have contracted out of additional or second state pension arrangements).

It said the government had failed to give those people the information they need and provided only limited details on the ways in which they could lose out under the new arrangements.

This suggests government departments believed their own hype about the single tier pension being more simple and making it easier for people to work out what they’ll get.

It was more than a year after the unveiling of the new system before the DWP admitted that the message that everyone with 35 years of national insurance contributions (NICs) would get the new pension in full wasn’t quite accurate.

The reality is that those NICs had to be paid for 35 years at the full rate to qualify for the new single tier payment (of £155.65 a week). This is the main reason why almost seven in ten claimants in the first four years of the single tier pension will get less than the flat rate, according to the Institute for Fiscal Studies.

The government has had nearly two years to get that message right, but it has failed miserably. A fact sheet issued last year on the implications for those who had contracted out was “barely intelligible”, according to one pensions expert. No wonder pensions minister Ros Altmann was forced to admit the deal was mis-sold by the government.

Another report, published today by the Commons Work and Pensions Select Committee, accuses the government of oversimplifying the message about the flat rate.

It says the DWP should now write to those who stand to receive less in the early years of the new state pension and “clearly set out the person’s circumstances, the projected entitlements and the means of improving them”.

It also wants the govern­ment to provide a new helpline service for those people, so they can work out ways of increasing their entitlement. Unfortunately, the gov­ern­ment has fallen so far short in communicating the changes that there’s little hope of it getting it right now. Perhaps it’s just another reflection of a government so out of touch that the notion of depending on the weekly state pension for shelter, food and heat just seems outlandish.

Thousands retiring over the coming months will get a nasty shock when they find out they won’t be getting the state pension they expect.