The Department for Work and Pensions is closing its ‘combined pension statement service’ in favour of a new “transformed” digital alternative.
The CPS was a voluntary service launched in 2001 that combined employee pension information into a single statement with details of their state pension and workplace or personal pension.
Pension providers, trustees and third-party administrators were encouraged to use the service to help scheme members, while for the DWP it ultimately improved the data held across workplace pension schemes.
A DWP spokesman said that they are now working with HM Revenue and Customs to introduce a “transformed, largely digital service” that will help users to understand the link between their state pension and national insurance.
“It will allow users to model future circumstances and the effect of paying additional NI contributions,” read the statement.
“The new service is currently being tested by selected people in a private beta environment. We are aiming to make it available publicly later this year.”
Steven Cameron, regulatory strategy director at Aegon, commented that the concept of the service was well intentioned, but ahead of its time.
“Allowing individuals to regularly see their private and state pensions side by side gives them a very clear picture of what their future retirement income might look like. But in practice, the significant practical challenges of combining pensions within a paper-based system meant few employers offered it.”
He argued that the move to the new single state pension of around £140 per week from next April makes it all the more important that individuals have an accurate prediction of the size of their pot, as the majority will not be entitled to the full amount and many may be disappointed if they only realise this upon reaching state pension age.
“As we move away from paper-based pension statements to a digital world, with the government’s participation, it should be easier for pension providers and employers to offer scheme members online access not just to projections of private pensions but also to information on state pension entitlements,” commented Mr Cameron.
Work is already underway on the ‘pensions dashboard’ idea, which aims to offer individuals digital access to information on all of their pension entitlements, in one place.
In the spring the Financial Conduct Authority confirmed it was working with government to explore the most effective and efficient way to develop such an online portal, with a view to implementing it over the next few years.
It would be following in the footsteps of similar projects underway in the Netherlands and Sweden. A report from the Financial Inclusion Commission called on regulators and the DWP to implement something like what is already available in the latter country.
The Swedish ‘Minpension’ system is updated on a near real-time basis for most pension funds, with over 2m people registered on the service, from a population of 9.5m and with an annual budget of about £4m.
peter.walker@ft.com
