DWP won't contact state pension losers

According to the National Audit Office's 54-page report, called Department for Work & Pensions: Introduction of the new state pension, the DWP's attempts to "improve people’s understanding of their state pension have had limited success so far".

The report from the NAO stated it was not yet clear whether the simplification of the state pension will support wider pension reforms, and warned although the rule changes "mean some people will gain while others lose out", the losers have not received appropriate communication from the DWP.

The DWP had agreed earlier this year to write to more than 100,000 people within nine years of state pension age and whose national insurance record suggested they would not meet the 10 years' minimum qualifying period for the new state pension.

However, the NAO said the DWP had "rejected" the Work & Pensions select committee's recommendation to write to two further groups "adversely affected" by the new state pension.

According to the report: "These were people, largely women, who are no longer able to derive pensions based on their spouse's national insurance record; and people reaching state pension age from 6 April 2016, who are eligible for guaranteed minimum pensions, which the government will not longer uprate through the state pension to take account of inflation."

Good communication and engagement is something which the government and the pensions industry have to deliver.Tom McPhail

The NAO report stated the DWP's reason for not writing to these groups was that it could "not accurately identify" who was affected.

Instead, it pledged to focus on a communication campaign to get people to consult with the gov.uk website.

Yet the NAO report has highlighted that one of the Department’s objectives of state pension reforms was to prompt people to take action and plan for their retirement from a younger age.

It stated there was "not yet any evidence that the new state pension has encouraged people to save more for their retirement", with 60 per cent of people still thinking that if they retired after April 2016, having worked for 35 years or more, they will always get the full amount of state pension.

Instead, they will actually get a payout based on their national insurance record, taking into account any contracted-out periods.

The report stated: "The DWP has not yet tackled all the barriers that discourage people from saving for their retirement, although other pension reforms help."

As a result, the DWP stated it plans to spend £7m on state pension communications between 2016 and 2020.

According to the report: "The DWP recognises the need to adapt its communications campaign to achieve the project's long-term objectives. 

"The DWP aims to raise awareness of the importance of checking state pension entitlement among a wider audience."

To help with this, the DWP intends to align its campaign with Pension Wise and auto-enrolment campaigns.

The DWP also intends to highlight planned increases in state pension age  - a historic source of contention, as the recent Women Against State Pension Inequality campaign has shown - and, specifically, raise awareness of the date people can start to claim their state pension.

Amyas Morse, head of the NAO, said: "The Department’s implementation of the new state pension so far represents value for money. Reforming pensions is, however, a long-term endeavour.

"The Department has yet to reintroduce its plans for the digital administration of pensions, and achieving the longer-term objectives of the new state pension will depend on how it interacts with wider reform of the pensions system.

"Both these key areas will need to be tackled to achieve value for money as the reforms develop.”

The NAO report revealed that as a result of the DWP introducing the new state pension one year ahead of the date originally proposed, it had brought in higher national insurance contributions for some employers and employees earlier than planned.

The DWP made the changes in time to allow the uninterrupted payment of state pension from the ‘go-live’ date in April 2016. The cost of implementing the programme was within budget.

However, the DWP deferred the development of a more ambitious digital solution that offered operational efficiencies and new customer services.

It has not yet introduced a new digital claims service, which is now due in April 2017.

Instead, the NAO report highlighted that the DWP had "prioritised the digital pension statements service", which it introduced in February 2016.

Yet the report suggested take-up of the digital pension statements service has been slow, with just 1.7 per cent of deferred and pensioner memberships taking this up by the end of August 2016.

Tom McPhail, head of retirement policy for Hargreaves Lansdown, said the NAO report was "largely positive about the implementation of the reformed state pension."

However, he said the report highlighted that a key objective of the reforms has been to deliver a simpler foundation state retirement income on which individuals could build their private savings.

We’re committed to helping people plan better for retirement which is why we widely communicated changes to the State Pension. DWP spokesman

According to Mr McPhail, "on this communication challenge the DWP has enjoyed only limited success.

"In April 2016 just 25 per cent of working age people knew how the changes to the state pension would affect them and 18 per cent knew what their state pension is likely to be.

"If individuals can’t afford to retire, it will mean the policies have failed. The basic state pension isn’t enough for most people to live on so they need private savings too.

"Currently many millions aren’t saving enough for retirement and neither the new state pension nor the auto-enrolment programme will change this on their own. Good communication and engagement is vital to help individuals plan for their retirement.

"This is something which the government and the pensions industry alike have to deliver if we are to help individuals take responsibility for their own futures.”

In response to the NAO report's claims, a DWP spokesman said the department has been communicating the changes to people, and pointed out the new state pension had been delivered "on time" and "on budget".

He said: “As this report makes clear, we’ve successfully delivered the new state pension on time and on budget.

"We’re committed to helping people plan better for retirement which is why we widely communicated changes to the state pension - almost 80 per cent of people have said they were aware of any changes 10 years before reaching state pension age."

On the subject of the new digital claims service, the DWP spokesman added: "We’ve prioritised digital pension statements to coincide with the implementation of the new state pension and encourage people to start planning early for retirement.

"We are also rolling out automatic enrolment, which is already helping 6.7m people to either newly save or save more into a workplace pension.”

simoney.kyriakou@ft.com