Pensions Minister Baroness Altmann has unveiled a new communications drive ahead of the introduction of the new State Pension next year, which she says has not been adequately explained to date.
Launched under the tagline “Our state pension is changing”, the campaign tells members of the public how to find out how it affects them, based on their own National Insurance record.
The DWP says that in the first 10 years after implementation, around 650,000 women are expected to benefit from the starting amount calculation, receiving on average £8 a week more in State Pension. However, the government has refused requests from Corporate Adviser to disclose how many women or men will receive less pension under the new system, or the extent to which those losing out are concentrated amongst those who were contracted into secondary state pension for the majority of their working lives.
Pension experts say low earners with full work history who have been contracted in could lose around 25 per cent of their state pension under the switch. Those contracted out, including those with final salary benefits and those with sufficent assets to set up their own personal pension, are on generally net winners from the switch according to research from Hymans Robertson. ONS statistics show that while contracted-out individuals of all ages will continue to accrue state pension under the new system, all of those with a full work history who remained contracted in will be net losers.
The full rate will be above the basic means-test in Pension Credit, and the system will remain contributory in nature, although anyone already at the level of the new State pension
Transitional arrangements see the DWP calculating a “starting amount” for the new State Pension taking into account a person’s record up to April 2016.
Anyone aged 55 or over can apply for a personalised state pension statement that will give them an estimate of what they will get under the new system. This will be based on their work history and National Insurance contributions to date. The statements have recently been updated to include information on the contracted out deduction that may have been made.
The statements also give additional information about how people may be able to improve their State Pension before they reach State Pension age.
Minister for pensions Baroness Altmann says: “Huge efforts have been put into reforming the mind-blowingly complicated State Pension system that exists today into something that, over time, will be clearer.
“But the job of explaining to people how the reforms will affect them hasn’t been done well enough.
People need to understand, so they can make the right decisions about saving and preparing for later life. One of my first actions on becoming Pensions Minister was to identify this priority, and I’m very pleased to now be launching this major campaign.
In particular, the new advertisements target people within 10 years of reaching State Pension age, a group which also has access to new freedoms to spend private pension savings flexibly. Many of these people may want to base decisions about whether or not to draw down their private pension savings on their likely State Pension amount.”