Pensions minister Ros Altmann has unveiled an advertising campaign explaining the new state pension, set to be introduced in April next year, whilst admitting that previous efforts to explain the shake-up left something to be desired.
Under the tagline “Our state pension is changing”, the campaign aims to broaden the public’s understanding of how the new state pension will work and how it affects them, based on their own national insurance record.
Like the system it replaces, the new state pension will be contributory in nature, with the weekly payment people receive being dependent on the number and type of national insurance contributions they have made.
The campaign comes after widespread criticism of the way the government has handled the introduction of the new state pension.
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.
Writing in FTAdviser’s sister newspaper Financial Adviser, Tony Hazell, who also writes for the Daily Mail’s Money Mail section, said: “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... those planning retirement are fumbling in a fog that makes sensible planning hellishly difficult.”
Pensions minister Baroness Altmann responded that huge efforts have been put into reforming the “mind-blowingly complicated” state pension system into something that, over time, will be clearer and fairer for everybody.
“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.
She pointed out that 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.
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. They also give additional information about how people may be able to improve their state pension before they reach state pension age.
In the first 10 years after implementation, Baroness Altmann said around 650,000 women are expected to benefit from the starting amount calculation, receiving on average £8 a week more in state pension.
She said: “At the heart of the new state pension is the concept of a clearer, fairer, single payment. The full rate will be above the basic means-test in pension credit, but the system will remain contributory in nature.