After the promises, the hopes and the let down, the new state pension has finally arrived.
While I am a supporter of the reforms in general, I have been a consistent critic of the way the information has been disseminated.
The Department for Work and Pensions managed to turn what should have been a positive change into a source of controversy and ill-feeling among many.
Instead of explaining clearly how the pension would work, DWP instead chose to embark on a marketing campaign highlighting a headline rate and initially giving the totally false impression that everyone would get this amount.
DWP chose to embark on a campaign highlighting a headline rate and giving the false impression that everyone would get this amountIn fact, the vast majority of people who will start to draw their pension over the next few years will not get the £155.65 per week rate.
DWP also sent out baffling letters that were supposed to explain how the pension was calculated, but merely added to confusion.
I have even received a reader’s letter asking whether a former employer can be sued for enrolling them in a final salary pension and contracting them out of the state second pension.
Such misunderstandings could have been avoided if the new pension had been explained properly at the outset.
There are other nasties lurking as well. In particular, the rules on inheriting a pension will be considerably worse for women than those previously in force.
Also, those who have built up fewer than 10 years national insurance credits at retirement will not receive a pension. This could affect 35,000 people by 2020, the DWP admits.
UK citizens who go to work abroad could be particularly hit. About 20 per cent of all UK residents living abroad (around 400,000 people) could be affected by 2040.
Most annoying for the moderately well-off is that the bonus for delaying taking the pension has been slashed from 10.4 per cent a year to 5.8 per cent, and the money can no longer be taken as a lump sum.
These are some of the negatives. But, overall, the new state pension is a massive step forward.
Future generations will have a clear idea of how much they will receive because the calculation will, eventually, be simple: the number of qualifying years NI paid multiplied by a single figure, which is currently £4.44.
They will know that their saving will be rewarded rather than used as a cosh to clobber their benefits.
Those who work for more years – or build up credits for caring for others – will get the pension they deserve.
But, for the next few years, I suspect we will continue to wade through a mire of misunderstanding and confusion.
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NS&I issues prize cuts to bonds
One thing I learned at Money Mail was that our readers love premium bonds. Any changes would set the phones ringing, and there were frequent letters usually involving conspiracy theories on how the numbers are picked.
For the no-risk investor, the bonds look more attractive than ever in these days of low interest rates. The prize fund rate will be cut to 1.25 per cent tax free from 1.35 per cent from June. Even so, premium bonds offer the potential for a better return than other national savings products.
Income bonds and the Direct Isa will now pay a measly 1 per cent from June, while the Direct Saver will be cut to 0.8 per cent and the Investment Account to 0.45 per cent.
Of course the odds are not great. The chances of winning a prize rise to 30,000 to 1 from the current 26,000 to 1. But there will be a sharp increase in the number of £50 and £100 prizes, although there are cuts at other levels.
Ok, it is a flutter rather than an investment. But it is one where you do not lose your stake.
What a shame that National Savings and Investments does not sell bonds in Tesco to offer an alternative to those who spend their hard-earned cash on scratch cards and lottery tickets.
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HL misses the point on Brussels
Peter Hargreaves has made it clear that he would prefer his future to be free of interference from Brussels.
But someone at Hargreaves Lansdown clearly does not approve. Hence they issued a rather peevish statement informing us that Peter no longer works there, nor is he a director.
Despite this, I feel that the views of someone who jointly built a multibillion pound business should still carry some weight.
Hargreaves Lansdown stated that it has decided not to take a stance because this is ‘political matter’. Perhaps they’ve forgotten MiFID II, UCITS et al?
They may wish to avoid offending clients and business partners, but to claim that an issue which could have such sweeping financial implications for the firm and its clients is merely a political one, is surely missing the point.
Tony Hazell writes for the Daily Mail’s Money Mail section
