State pension of £151? Most only see £116

Thousands of people planning to retire in the next few years could be sleepwalking into an impoverished old age.

Not my words, but those of Malcolm McLean, senior pensions consultant at Barnett Waddingham.

I first spoke to Mr McLean several decades ago when I began writing about pensions and I have always had the utmost respect for his views. Never one to shoot from the hip, his comments are always considered and balanced.

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His concerns – like mine – centre on the new state pension, and the likelihood that many people are operating under a false perception of how much they are likely to receive.

A freedom of information request by a national newspaper revealed that almost two-thirds of people retiring next year will receive about £116 a week as their flat rate pension – a long way short of the £151 they might be expecting.

This is the latest confirmation that what started as a ground-breaking idea is rapidly descending into farce.

The new state pension was mis-sold as a concept from day one, and the government has done far too little to correct those early mistakes. Journalists and financial advisers have been left to hunt out the facts while the department for work and pensions has at times batted back attempts to get solid information.

Those planning retirement are fumbling in a fog that makes sensible planning hellishly difficult.

They are told that deductions will be made for the years when they have been contracted out – but there appears to be no simple calculation they can apply to get an idea of how much they will lose.

Surely it would not be beyond the realms of possibility to have an online calculator. Instead we must write to request a forecast – and given previous forecasts there must be some doubt over their eventual accuracy.

Meanwhile, people are cashing in their savings, possibly in the expectation their state pension will be much larger than will be the case.

Do not misunderstand me. I am 100 per cent in favour of the pension reforms.

But the explanation of them and the implementation of the state pension changes have been a complete mess.


China crisis does not justify annuities

It is always interesting to see how advisers, fund managers and the media react to stock market falls. How do you deliver the bad news while at the same time avoiding panic?

As usual, we have been told that it is only a real loss if you sell, that there could be buying opportunities but that there may be further falls. So plenty of fence-sitting.

One expert who I expect will have put plenty of people’s noses out of joint is the BBC’s economics editor Robert Peston, who appeared to be almost celebrating the mayhem, with scant regard for the effect it had had on his viewers’ pensions.