In the interests of research I applied for my state pension statement a few weeks ago.
When it arrived I spent a while scratching my head, then consulted my wife who had also received hers. She too was confused.
We both knew we would not qualify for the full flat-rate pension but neither of us could fathom how they had come to the estimates provided.
The statement contained precious little information and the few figures offered didn’t add up.
It took four phone conversations with three different department for work and pensions officials through their helpline for me to conclude that an exercise in simplification has led to further obfuscation.
Let me take you through the figures I was given. My state pension estimate is £138.33 a week. I have 37 qualifying years. To work out the estimate, the DWP says it has used £151.25 a week as the full rate but I have had a deduction of £4.58 because I have been contracted out.
I decided to do what I believed most people would do and subtracted £4.58 from £151.25 to come to £146.67 (£8.34 more than my estimate). So I then phoned DWP’s helpline to ask what had happened to my missing £8.34.
Dealing with the DWP was far easier than dealing with Revenue and Customs. For starters they answer the phone and return calls when they say they will.
The first person I spoke to admitted: “As to how the calculation is done, I have no idea.”
However contestant number three – a lovely, helpful chap called Mark – explained that two calculations were performed, and I was getting the better of the two results.
Most of my contracted-out years were post 1997, which would leave me considerably worse off under the new system than the current one.
He further explained that with three years’ contributions after April 2016, I would actually achieve the full flat-rate pension.
That crucial piece of information was nowhere to be seen on my statement.
It seems that previous statements had been too complicated so they had now been simplified.
But these new ones make little sense and are potentially misleading.
So what should they contain? A front page could give the basic details and a second section carry more detailed calculations for those who are interested.
We need to know at a glance how much pension has been built up to date, how much is likely to be achieved by contributions to normal retirement age and how many more years’ contributions would be needed after April 2016 to achieve the full pension if this is likely to be earlier than retirement age.
The second section could carry details of the two calculations used to arrive at the starting pension, including the deductions for contracting out.
The current statement gives people no hope of understanding how the answer has been reached, whether the calculations are actually correct and whether they will reach the full flat-rate pension.