MPs warn too many don’t understand the new pension

MPS warn on pensions

MPs claim too many people don’t understand the new old age pension because ministers haven’t explained the changes properly.

The Works and Pensions Select Committee said: “Failures of communication will mean the too few people don’t understand it.”

More than half

The committee claimed ministers have not made it clear that more than half of claimants will not get the new £155.65 a week payment because of contracting out or contribution gaps.

They say millions of people may be planning their retirement based on wrong information because of government ‘bungling.’  It particularly applies to women whose pension age is changing.

Widespread concerns

A report from the committee earlier this year said there were ‘widespread concerns’ that women had been unaware of increases in their state pension age.

One woman had reported to them that two weeks before her 60th birthday, which she thought would be her retirement age, she received a letter telling her she was not entitled to draw her pension until she was 66.


The report said: “At a crucial time of reform to the state pensions and the state pension age, Department of Works and Pensions (DWP) statements are insufficiently clear.

This lack of clarity increases the chances that people misunderstand the value of their state pension or the age at which they will receive it.  In turn this increases the chances that they will not best plan for their retirement.”

New pension

The new state pension will replace the old basic and additional pensions on April 6th.  Anyone already receiving their pension will continue to receive it under the existing rules, but new pensioners will receive a weekly rate of £155.65.

However, that figure is not set for everyone – it could be higher or lower, depending on the individual’s National Insurance record of which they will need 10 qualifying years of contributions. Around 32% are expected to get more than the basic figure, after building up additional state pension under the current system.

By 2040 it is expected that 80% of claimants will be receiving the full flat rate pension.


But the report claims the government has ‘managed to muddle’ its communications ‘to the point where neither the winners nor the users yet know who they are.”

Claimants with fewer than 10 qualifying years of National Insurance contributions, or who derive their own pension rights from the contributions of their spouse, face receiving less than the standard rate in the early years.


Anyone who opted for a Guaranteed Minimum Pension (GMP) between 1978 and 1988 will also lose out because they were opted out of the state additional pension scheme, with payments going towards their occupational schemes.

“People with high value GMPs who reach state pension age just after April 2016 stand to lose the greatest amounts,” the committee said.

Unprepared and confused

Committee chairman Frank Field said: “The over-simplified message about the flat rate has left money people unprepared and confused.”

But he added that the new system would eventually be ‘a welcome simplification of an over-complicated system.’


Paul Green of Saga said: “Most people make significant financial plans about their future based on what they believe they will get from their state pension and, if inaccurate or outdated, it could leave them will little or no time to make up for this government information error.”

A DWP spokesman said: “Millions stand to gain from the changes, including women and the self-employed, who have so often lost out in the past.”

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