The Work and Pensions select committee has raised concerns over evidence that state pension statements and forecasts are confusing, contradictory and not providing people with essential information.
A report on the New State Pension, published today (11 January) called on the Department for Work and Pensions to make urgent changes to the information they are sending to people reaching retirement age.
The committee stated it has become clear over the last few months that the new state pension is widely misunderstood.
The new system, which was introduced under the Pensions Act 2014, replaces the basic and additional pensions for people reaching state pension age from 6 April 2016.
Evidence collected for the committee’s inquiry confirmed confusion over what people will receive – and when they will receive it – is rife.
This interim report sets out a series of changes to statements which the committee believes the DWP should urgently make:
Statements should be limited to one page in length;
Key messages should be highlighted in boxes to ensure they stand out clearly;
Statements should prioritise the current value of state pension built up, state pension age, the date that age will be reached, and how to build up additional benefits;
State pension age should be highlighted in a prominent position, especially for those whose pension age has changed;
Means of getting further information should be clear and that information should be readily available;
The term ‘contracted out pension equivalent’ should be replaced by ‘contracting out deduction’; and
The contracting out deduction should be explained as such, making it clear that it is a reduced state pensions as a consequence of paying reduced NI contributions, but may be compensated for by the individual’s private pension scheme.
Chairman of the committee Frank Field MP commented successive governments have “bungled” the fundamental duty to tell women of these major changes to when they can expect their state pension.
“Retirement expectations have been smashed, as some women have only been told a couple of years before the date they expected to retire that no such retirement pension is now available.
“We are also concerned about the accuracy of existing information that is being sent out to women about their state pensions entitlement. Groups representing this grotesquely disadvantaged group of women have suggested a pension entitlement notice.”
He added the committee expects the DWP to immediately “hammer out” a new pension entitlement notice and begin supplying all women with accurate information on their pension entitlement.
Last week, MPs overwhelmingly backed a motion to introduce transitional arrangements for women negatively affected by the equalisation of the state pension age.
State pension age increases to equalise men and women began to take effect in 2010, but chancellor George Osborne recently accelerated the schedule.
Chris Noon, a partner at actuarial consultant Hymans Robertson, agreed the new state pension is widely misunderstood.
“Due to the speed of the transition, the redistribution of government spend on state pensions is extreme. Many people will not know how much they will be entitled to in the near future or the impact this has on their long-term pension position.