Understanding the new State Pension inquiry

We recommend that the following changes are made to state pension statements immediately: • 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; 18 Department for Work and Pensions (USP0137) 19 Pension and Lifetime Savings Association (US0120) 20 Association of British Insurers (USP0132); BT Pension Scheme Management Limited (USP0053) 21 Association of British Insurers (USP0132); BT Pension Scheme Management Limited (USP0053); Q94 (Kate Smith, Aegon UK) 22 BT Pension Scheme Management Limited (USP0053) 23 Pension and Lifetime Savings Association (US0120) 6 Understanding the new state pension – interim report on pension statements • means of getting further information, such as a full breakdown of NI history, details and calculations of NSP starting amounts, and calculations of deductions for period of contracting out 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.

We strongly support state pension age equalisation and increases in the state pension age as life expectancy rises.

We will never know how many women did not know, or could not be reasonably expected to know, that their state pension age was increasing. What is apparent with hindsight is that previous governments could have done a lot better in communicating the changes. Well into this decade far too many affected women were unaware of the equalisation of state pension age at 65 legislated for in 1995. While the last and current Governments have done more to communicate state pension age changes than their predecessors, this has been too little too late for many women, especially given increases in the state pension age have been accelerated at relatively short notice. Many thousands of women justifiably feel aggrieved.

Reverting to the state pension ages in place before the 1995 Pensions Act would be ill-targeted and prohibitively expensive policy.

Extending the timetable for increases in the state pension age or widening eligibility for pension credit would be prohibitively expensive and could have significant unintended consequences.

We are long past the stage where an ideal outcome to the necessary process of equalising and increasing the state pension age could be achieved. We are aware both that the Government is operating under severe fiscal constraint and that the original rationale for changes to state pension age was to ensure the fiscal sustainability of the system. The Government has maintained that it is unwilling to devote additional resources to providing transitional arrangements for women affected by the state pension age changes. We have borne this in mind in our assessment of the options available. We recommend that, if the Government is subsequently able to allocate further funding, it should commission an independent assessment of the merits of the following options: • slowing the increase in the state pension age to 66; • revising the timetable for increases in the state pension age to reach 65 by April 2019 and 66 by April 2021; • retaining the Pensions Act 1995 timetable for increases in the qualifying age for pension credit; and • a transitional pension benefit.

We are interested in an idea that was proposed of permitting early retirement, from a specified age and for a defined cohort of women, on an actuarially neutral basis. This arrangement, which features in some defined benefit occupational pension schemes, would permit women in that specified age group to choose to take a state pension sooner than scheduled in return for lower weekly payments for the duration of their retirements. The actuarial reduction factor used should ensure that, on average, over the lifetimes of the pensioners concerned, there would be no additional pension costs to the exchequer.

There are several questions which would need to be addressed before such an idea could be progressed. The details and limits of eligibility, and the rationale for this relative to those earlier or later, would need to be determined, including the position of men at 65. It would bring forward some public spending, as an unknown number of women would take their state pension early. This would increase public sector net borrowing in the short term in return for a longer term reduction. The total fiscal impact would not be known until all the relevant pensions ceased to be paid. This factor, added to the unknown take-up rate, would add to budgeting uncertainty. The scheme would also need to be properly administered, which has cost implications. Any changes would need to be assessed for their wider impact on tax and benefits. It may be that any increased costs to the public purse could be incorporated in the factors used to reduce weekly pensions to make the policy more likely to be fiscally neutral in the long term.

As this was not the focus of our inquiry the committee has not taken much evidence on this idea. We intend to in the coming weeks. It is, however, an interesting option and one the Government should explore.

The state pension age will inevitably rise again. Passing legislation in good time is does not constitute sufficient notice. Governments must ensure that those affected are contacted directly to explain the effects on their individual circumstances and that there is widespread advance communication of the changes. Furthermore, they must regularly monitor awareness and adjust personalised and general communications accordingly.

The Government’s pensions strategy is predicated on people better engaging with financial planning and saving for retirement. This requires greater public understanding of what can seem arcane and distant concerns. By adopting more engaging, innovative and adaptable communications and awareness-raising campaigns, this and future Governments can better support policy objectives and potentially reduce costs. (Paragraph 55) 24 Communication of state pension age changes s0591 eht nrob nemow rof segnahc ega noisnep etatS :1 xennA 5991 ecnis noitalsigel fo tluser a sa 2591 yluJ 5 dna 0591 lirpA 6 neewteb nrob nemow fo egA noisneP etatS ot segnahC )strohoc htrib-fo-etad eseht rof eludehcs tnerruc( eludehcs 1102 tcA snoisneP eludehcs )7002 tcA snoisneP yb dednema( 5991 tcA snoisneP APS ni egnahC APS ni egnahC APS ni egnahC htiw derapmoc htiw derapmoc htiw derapmoc deniatta ega noisnep nehw egA deniatta ega elbanoisnep yaD deniatta ega noisnep nehw egA deniatta ega elbanoisnep yaD htrib fo etad s'namoW 5991-erp )tdma 7002(5991 5991-erp eludehcs eludehcs eludehcs dnA neewteB dnA neewteB dnA neewteB dnA neewteB dnA neewteB shtnom 1-0 shtnom 0 m 1 y 06 d 1 y 06 0102 yaM 60 0102 yaM 60 shtnom 1-0 m 1 y 06 d 1 y 06 0102 yaM 60 0102 yaM 60 0591 yaM 50 0591 rpA 60 shtnom 2-1 shtnom 0 m 2 y 06 d 1 m 1 y 06 0102 luJ 60 0102 luJ 60 shtnom 2-1 m 2 y 06 d 1 m 1 y 06 0102 luJ 60 0102 luJ 60 0591 nuJ 50 0591 yaM 60 shtnom 3-2 shtnom 0 m 3 y 06 d 1 m 2 y 06 0102 peS 60 0102 peS 60 shtnom 3-2 m 3 y 06 d 1 m 2 y 06 0102 peS 60 0102 peS 60 0591 luJ 50 0591 nuJ 60 shtnom 4-3 shtnom 0 m 4 y 06 d 1 m 3 y 06 0102 voN 60 0102 voN 60 shtnom 4-3 m 4 y 06 d 1 m 3 y 06 0102 voN 60 0102 voN 60 0591 guA 50 0591 luJ 60 shtnom 5-4 shtnom 0 m 5 y 06 d 1 m 4 y 06 1102 naJ 60 1102 naJ 60 shtnom 5-4 m 5 y 06 d 1 m 4 y 06 1102 naJ 60 1102 naJ 60 0591 peS 50 0591 guA 60 shtnom 6-5 shtnom 0 m 6 y 06 d 1 m 5 y 06 1102 raM 60 1102 raM 60 shtnom 6-5 m 6 y 06 d 1 m 5 y 06 1102 raM 60 1102 raM 60 0591 tcO 50 0591 peS 60 shtnom 7-6 shtnom 0 m 7 y 06 d 1 m 6 y 06 1102 yaM 60 1102 yaM 60 shtnom 7-6 m 7 y 06 d 1 m 6 y 06 1102 yaM 60 1102 yaM 60 0591 voN 50 0591 tcO 60 shtnom 8-7 shtnom 0 m 8 y 06 d 1 m 7 y 06 1102 luJ 60 1102 luJ 60 shtnom 8-7 m 8 y 06 d 1 m 7 y 06 1102 luJ 60 1102 luJ 60 0591 ceD 50 0591 voN 60 shtnom 9-8 shtnom 0 m 9 y 06 d 1 m 8 y 06 1102 peS 60 1102 peS 60 shtnom 9-8 m 9 y 06 d 1 m 8 y 06 1102 peS 60 1102 peS 60 1591 naJ 50 0591 ceD 60 shtnom 01-9 shtnom 0 m 01 y 06 d 1 m 9 y 06 1102 voN 60 1102 voN 60 shtnom 01-9 m 01 y 06 d 1 m 9 y 06 1102 voN 60 1102 voN 60 1591 beF 50 1591 naJ 60 shtnom 11-01 shtnom 0 m 11 y 06 d 1 m 01 y 06 2102 naJ 60 2102 naJ 60 shtnom 11-01 m 11 y 06 d 1 m 01 y 06 2102 naJ 60 2102 naJ 60 1591 raM 50 1591 beF 60 shtnom 21-11 shtnom 0 y 16 d 1 m 11 y 06 2102 raM 60 2102 raM 60 shtnom 21-11 y 16 d 1 m 11 y 06 2102 raM 60 2102 raM 60 1591 rpA 50 1591 raM 60 shtnom 31-21 shtnom 0 m 1 y 16 d 1 y 16 2102 yaM 60 2102 yaM 60 shtnom 31-21 m 1 y 16 d 1 y 16 2102 yaM 60 2102 yaM 60 1591 yaM 50 1591 rpA 60 shtnom 41-31 shtnom 0 m 2 y 16 d 1 m 1 y 16 2102 luJ 60 2102 luJ 60 shtnom 41-31 m 2 y 16 d 1 m 1 y 16 2102 luJ 60 2102 luJ 60 1591 nuJ 50 1591 yaM 60 shtnom 51-41 shtnom 0 m 3 y 16 d 1 m 2 y 16 2102 peS 60 2102 peS 60 shtnom 51-41 m 3 y 16 d 1 m 2 y 16 2102 peS 60 2102 peS 60 1591 luJ 50 1591 nuJ 60 shtnom 61-51 shtnom 0 m 4 y 16 d 1 m 3 y 16 2102 voN 60 2102 voN 60 shtnom 61-51 m 4 y 16 d 1 m 3 y 16 2102 voN 60 2102 voN 60 1591 guA 50 1591 luJ 60 shtnom 71-61 shtnom 0 m 5 y 16 d 1 m 4 y 16 3102 naJ 60 3102 naJ 60 shtnom 71-61 m 5 y 16 d 1 m 4 y 16 3102 naJ 60 3102 naJ 60 1591 peS 50 1591 guA 60 shtnom 81-71 shtnom 0 m 6 y 16 d 1 m 5 y 16 3102 raM 60 3102 raM 60 shtnom 81-71 m 6 y 16 d 1 m 5 y 16 3102 raM 60 3102 raM 60 1591 tcO 50 1591 peS 60 shtnom 91-81 shtnom 0 m 7 y 16 d 1 m 6 y 16 3102 yaM 60 3102 yaM 60 shtnom 91-81 m 7 y 16 d 1 m 6 y 16 3102 yaM 60 3102 yaM 60 1591 voN 50 1591 tcO 60 shtnom 02-91 shtnom 0 m 8 y 16 d 1 m 7 y 16 3102 luJ 60 3102 luJ 60 shtnom 02-91 m 8 y 16 d 1 m 7 y 16 3102 luJ 60 3102 luJ 60 1591 ceD 50 1591 voN 60 shtnom 12-02 shtnom 0 m 9 y 16 d 1 m 8 y 16 3102 peS 60 3102 peS 60 shtnom 12-02 m 9 y 16 d 1 m 8 y 16 3102 peS 60 3102 peS 60 2591 naJ 50 1591 ceD 60 shtnom 22-12 shtnom 0 m 01 y 16 d 1 m 9 y 16 3102 voN 60 3102 voN 60 shtnom 22-12 m 01 y 16 d 1 m 9 y 16 3102 voN 60 3102 voN 60 2591 beF 50 2591 naJ 60 shtnom 32-22 shtnom 0 m 11 y 16 d 1 m 01 y 16 4102 naJ 60 4102 naJ 60 shtnom 32-22 m 11 y 16 d 1 m 01 y 16 4102 naJ 60 4102 naJ 60 2591 raM 50 2591 beF 60 shtnom 42-32 shtnom 0 y 26 d 1 m 11 y 16 4102 raM 60 4102 raM 60 shtnom 42-32 y 26 d 1 m 11 y 16 4102 raM 60 4102 raM 60 2591 rpA 50 2591 raM 60 shtnom 52-42 shtnom 0 m 1 y 26 d 1 y 26 4102 yaM 60 4102 yaM 60 shtnom 52-42 m 1 y 26 d 1 y 26 4102 yaM 60 4102 yaM 60 2591 yaM 50 2591 rpA 60 shtnom 62-52 shtnom 0 m 2 y 26 d 1 m 1 y 26 4102 luJ 60 4102 luJ 60 shtnom 62-52 m 2 y 26 d 1 m 1 y 26 4102 luJ 60 4102 luJ 60 2591 nuJ 50 2591 yaM 60 shtnom 72-62 shtnom 0 m 3 y 26 d 1 m 2 y 26 4102 peS 60 4102 peS 60 shtnom 72-62 m 3 y 26 d 1 m 2 y 26 4102 peS 60 4102 peS 60 2591 luJ 50 2591 nuJ 60 Communication of state pension age changes 25 5991 ecnis noitalsigel fo tluser a sa 4591 rebmeceD 5 dna 2591 yluJ 6 neewteb nrob nemow fo egA noisneP etatS ot segnahC )strohoc htrib-fo-etad eseht rof eludehcs tnerruc( eludehcs 1102 tcA snoisneP eludehcs )7002 tcA snoisneP yb dednema( 5991 tcA snoisneP APS ni egnahC APS ni egnahC APS ni egnahC htiw derapmoc htiw derapmoc htiw derapmoc deniatta ega noisnep nehw egA deniatta ega elbanoisnep yaD deniatta ega noisnep nehw egA deniatta ega elbanoisnep yaD htrib fo etad s'namoW 5991-erp )tdma 7002(5991 5991-erp eludehcs eludehcs eludehcs dnA neewteB dnA neewteB dnA neewteB dnA neewteB dnA neewteB shtnom 82-72 shtnom 0 m 4 y 26 d 1 m 3 y 26 4102 voN 60 4102 voN 60 shtnom 82-72 m 4 y 26 d 1 m 3 y 26 4102 voN 60 4102 voN 60 2591 guA 50 2591 luJ 60 shtnom 92-82 shtnom 0 m 5 y 26 d 1 m 4 y 26 5102 naJ 60 5102 naJ 60 shtnom 92-82 m 5 y 26 d 1 m 4 y 26 5102 naJ 60 5102 naJ 60 2591 peS 50 2591 guA 60 shtnom 03-92 shtnom 0 m 6 y 26 d 1 m 5 y 26 5102 raM 60 5102 raM 60 shtnom 03-92 m 6 y 26 d 1 m 5 y 26 5102 raM 60 5102 raM 60 2591 tcO 50 2591 peS 60 shtnom 13-03 shtnom 0 m 7 y 26 d 1 m 6 y 26 5102 yaM 60 5102 yaM 60 shtnom 13-03 m 7 y 26 d 1 m 6 y 26 5102 yaM 60 5102 yaM 60 2591 voN 50 2591 tcO 60 shtnom 23-13 shtnom 0 m 8 y 26 d 1 m 7 y 26 5102 luJ 60 5102 luJ 60 shtnom 23-13 m 8 y 26 d 1 m 7 y 26 5102 luJ 60 5102 luJ 60 2591 ceD 50 2591 voN 60 shtnom 33-23 shtnom 0 m 9 y 26 d 1 m 8 y 26 5102 peS 60 5102 peS 60 shtnom 33-23 m 9 y 26 d 1 m 8 y 26 5102 peS 60 5102 peS 60 3591 naJ 50 2591 ceD 60 shtnom 43-33 shtnom 0 m 01 y 26 d 1 m 9 y 26 5102 voN 60 5102 voN 60 shtnom 43-33 m 01 y 26 d 1 m 9 y 26 5102 voN 60 5102 voN 60 3591 beF 50 3591 naJ 60 shtnom 53-43 shtnom 0 m 11 y 26 d 1 m 01 y 26 6102 naJ 60 6102 naJ 60 shtnom 53-43 m 11 y 26 d 1 m 01 y 26 6102 naJ 60 6102 naJ 60 3591 raM 50 3591 beF 60 shtnom 63-53 shtnom 0 y 36 d 1 m 11 y 26 6102 raM 60 6102 raM 60 shtnom 63-53 y 36 d 1 m 11 y 26 6102 raM 60 6102 raM 60 3591 rpA 50 3591 raM 60 shtnom 93-83 shtnom 2 m 3 y 36 d 1 m 2 y 36 6102 luJ 60 6102 luJ 60 shtnom 73-63 m 1 y 36 d 1 y 36 6102 yaM 60 6102 yaM 60 3591 yaM 50 3591 rpA 60 shtnom 24-14 shtnom 4 m 6 y 36 d 1 m 5 y 36 6102 voN 60 6102 voN 60 shtnom 83-73 m 2 y 36 d 1 m 1 y 36 6102 luJ 60 6102 luJ 60 3591 nuJ 50 3591 yaM 60 shtnom 54-44 shtnom 6 m 9 y 36 d 1 m 8 y 36 7102 raM 60 7102 raM 60 shtnom 93-83 m 3 y 36 d 1 m 2 y 36 6102 peS 60 6102 peS 60 3591 luJ 50 3591 nuJ 60 shtnom 84-74 shtnom 8 y 46 d 1 m 11 y 36 7102 luJ 60 7102 luJ 60 shtnom 04-93 m 4 y 36 d 1 m 3 y 36 6102 voN 60 6102 voN 60 3591 guA 50 3591 luJ 60 shtnom 15-05 shtnom 01 m 3 y 46 d 1 m 2 y 46 7102 voN 60 7102 voN 60 shtnom 14-04 m 5 y 36 d 1 m 4 y 36 7102 naJ 60 7102 naJ 60 3591 peS 50 3591 guA 60 shtnom 45-35 shtnom 21 m 6 y 46 d 1 m 5 y 46 8102 raM 60 8102 raM 60 shtnom 24-14 m 6 y 36 d 1 m 5 y 36 7102 raM 60 7102 raM 60 3591 tcO 50 3591 peS 60 shtnom 75-65 shtnom 41 m 9 y 46 d 1 m 8 y 46 8102 luJ 60 8102 luJ 60 shtnom 34-24 m 7 y 36 d 1 m 6 y 36 7102 yaM 60 7102 yaM 60 3591 voN 50 3591 tcO 60 shtnom 06-95 shtnom 61 y 56 d 1 m 11 y 46 8102 voN 60 8102 voN 60 shtnom 44-34 m 8 y 36 d 1 m 7 y 36 7102 luJ 60 7102 luJ 60 3591 ceD 50 3591 voN 60 shtnom 36-26 shtnom 81 m 3 y 56 d 1 m 2 y 56 9102 raM 60 9102 raM 60 shtnom 54-44 m 9 y 36 d 1 m 8 y 36 7102 peS 60 7102 peS 60 4591 naJ 50 3591 ceD 60 shtnom 46-36 shtnom 81 m 4 y 56 d 1 m 3 y 56 9102 yaM 60 9102 yaM 60 shtnom 64-54 m 01 y 36 d 1 m 9 y 36 7102 voN 60 7102 voN 60 4591 beF 50 4591 naJ 60 shtnom 56-46 shtnom 81 m 5 y 56 d 1 m 4 y 56 9102 luJ 60 9102 luJ 60 shtnom 74-64 m 11 y 36 d 1 m 01 y 36 8102 naJ 60 8102 naJ 60 4591 raM 50 4591 beF 60 shtnom 66-56 shtnom 81 m 6 y 56 d 1 m 5 y 56 9102 peS 60 9102 peS 60 shtnom 84-74 y 46 d 1 m 11 y 36 8102 raM 60 8102 raM 60 4591 rpA 50 4591 raM 60 shtnom 76-66 shtnom 81 m 7 y 56 d 1 m 6 y 56 9102 voN 60 9102 voN 60 shtnom 94-84 m 1 y 46 d 1 y 46 8102 yaM 60 8102 yaM 60 4591 yaM 50 4591 rpA 60 shtnom 86-76 shtnom 81 m 8 y 56 d 1 m 7 y 56 0202 naJ 60 0202 naJ 60 shtnom 05-94 m 2 y 46 d 1 m 1 y 46 8102 luJ 60 8102 luJ 60 4591 nuJ 50 4591 yaM 60 shtnom 96-86 shtnom 81 m 9 y 56 d 1 m 8 y 56 0202 raM 60 0202 raM 60 shtnom 15-05 m 3 y 46 d 1 m 2 y 46 8102 peS 60 8102 peS 60 4591 luJ 50 4591 nuJ 60 shtnom 07-96 shtnom 81 m 01 y 56 d 1 m 9 y 56 0202 yaM 60 0202 yaM 60 shtnom 25-15 m 4 y 46 d 1 m 3 y 46 8102 voN 60 8102 voN 60 4591 guA 50 4591 luJ 60 shtnom 17-07 shtnom 81 m 11 y 56 d 1 m 01 y 56 0202 luJ 60 0202 luJ 60 shtnom 35-25 m 5 y 46 d 1 m 4 y 46 9102 naJ 60 9102 naJ 60 4591 peS 50 4591 guA 60 shtnom 27-17 shtnom 81 y 66 d 1 m 11 y 56 0202 peS 60 0202 peS 60 shtnom 45-35 m 6 y 46 d 1 m 5 y 46 9102 raM 60 9102 raM 60 4591 tcO 50 4591 peS 60 shtnom 27 shtnom 81-71 y 66 y 66 0202 voN 50 0202 tcO 60 shtnom 55-45 m 7 y 46 d 1 m 6 y 46 9102 yaM 60 9102 yaM 60 4591 voN 50 4591 tcO 60 shtnom 27 shtnom 71-61 y 66 y 66 0202 ceD 50 0202 voN 60 shtnom 65-55 m 8 y 46 d 1 m 7 y 46 9102 luJ 60 9102 luJ 60 4591 ceD 50 4591 voN 60 26 Communication of state pension age changes 5991 ecnis noitalsigel fo tluser a sa 0691 lirpA 5 dna 4591 rebmeceD 6 neewteb nrob nemow fo egA noisneP etatS ot segnahC )strohoc htrib-fo-etad eseht rof eludehcs tnerruc( eludehcs 1102 tcA snoisneP eludehcs )7002 tcA snoisneP yb dednema( 5991 tcA snoisneP APS ni egnahC APS ni egnahC APS ni egnahC htiw derapmoc htiw derapmoc htiw derapmoc deniatta ega noisnep nehw egA deniatta ega elbanoisnep yaD deniatta ega noisnep nehw egA deniatta ega elbanoisnep yaD htrib fo etad s'namoW 5991-erp )tdma 7002(5991 5991-erp eludehcs eludehcs eludehcs dnA neewteB dnA neewteB dnA neewteB dnA neewteB dnA neewteB shtnom 27 shtnom 61-51 y 66 y 66 1202 naJ 50 0202 ceD 60 shtnom 75-65 m 9 y 46 d 1 m 8 y 46 9102 peS 60 9102 peS 60 5591 naJ 50 4591 ceD 60 shtnom 27 shtnom 51-41 y 66 y 66 1202 beF 50 1202 naJ 60 shtnom 85-75 m 01 y 46 d 1 m 9 y 46 9102 voN 60 9102 voN 60 5591 beF 50 5591 naJ 60 shtnom 27 shtnom 41-31 y 66 y 66 1202 raM 50 1202 beF 60 shtnom 95-85 m 11 y 46 d 1 m 01 y 46 0202 naJ 60 0202 naJ 60 5591 raM 50 5591 beF 60 shtnom 27 shtnom 31-21 y 66 y 66 1202 rpA 50 1202 raM 60 shtnom 06-95 y 56 d 1 m 11 y 46 0202 raM 60 0202 raM 60 5591 rpA 50 5591 raM 60 shtnom 27 shtnom 21 y 66 y 66 5202 rpA 50 1202 rpA 60 shtnom 06 y 56 y 56 4202 rpA 50 0202 rpA 60 9591 rpA 50 5591 rpA 60 shtnom 27 shtnom 21-11 y 66 y 66 5202 yaM 50 5202 rpA 60 shtnom 16-06 m 1 y 56 d 1 y 56 4202 yaM 60 4202 yaM 60 9591 yaM 50 9591 rpA 60 shtnom 27 shtnom 11-01 y 66 y 66 5202 nuJ 50 5202 yaM 60 shtnom 26-16 m 2 y 56 d 1 m 1 y 56 4202 luJ 60 4202 luJ 60 9591 nuJ 50 9591 yaM 60 shtnom 27 shtnom 01-9 y 66 y 66 5202 luJ 50 5202 nuJ 60 shtnom 36-26 m 3 y 56 d 1 m 2 y 56 4202 peS 60 4202 peS 60 9591 luJ 50 9591 nuJ 60 shtnom 27 shtnom 9-8 y 66 y 66 5202 guA 50 5202 luJ 60 shtnom 46-36 m 4 y 56 d 1 m 3 y 56 4202 voN 60 4202 voN 60 9591 guA 50 9591 luJ 60 shtnom 27 shtnom 8-7 y 66 y 66 5202 peS 50 5202 guA 60 shtnom 56-46 m 5 y 56 d 1 m 4 y 56 5202 naJ 60 5202 naJ 60 9591 peS 50 9591 guA 60 shtnom 27 shtnom 7-6 y 66 y 66 5202 tcO 50 5202 peS 60 shtnom 66-56 m 6 y 56 d 1 m 5 y 56 5202 raM 60 5202 raM 60 9591 tcO 50 9591 peS 60 shtnom 27 shtnom 6-5 y 66 y 66 5202 voN 50 5202 tcO 60 shtnom 76-66 m 7 y 56 d 1 m 6 y 56 5202 yaM 60 5202 yaM 60 9591 voN 50 9591 tcO 60 shtnom 27 shtnom 5-4 y 66 y 66 5202 ceD 50 5202 voN 60 shtnom 86-76 m 8 y 56 d 1 m 7 y 56 5202 luJ 60 5202 luJ 60 9591 ceD 50 9591 voN 60 shtnom 27 shtnom 4-3 y 66 y 66 6202 naJ 50 5202 ceD 60 shtnom 96-86 m 9 y 56 d 1 m 8 y 56 5202 peS 60 5202 peS 60 0691 naJ 50 9591 ceD 60 shtnom 27 shtnom 3-2 y 66 y 66 6202 beF 50 6202 naJ 60 shtnom 07-96 m 01 y 56 d 1 m 9 y 56 5202 voN 60 5202 voN 60 0691 beF 50 0691 naJ 60 shtnom 27 shtnom 2-1 y 66 y 66 6202 raM 50 6202 beF 60 shtnom 17-07 m 11 y 56 d 1 m 01 y 56 6202 naJ 60 6202 naJ 60 0691 raM 50 0691 beF 60 shtnom 27 shtnom 1-0 y 66 y 66 6202 rpA 50 6202 raM 60 shtnom 27-17 y 66 d 1 m 11 y 56 6202 raM 60 6202 raM 60 0691 rpA 50 0691 raM 60 Communication of state pension age changes 27

The new state pension is a welcome simplification of an overcomplicated system. Over time, more and more pensioners will receive a single flat rate. During transition, however, the majority will not. This has not been made sufficiently clear in Government communications that have focused on the full flat rate of £155.65.

People with periods of contracting out typically gain from the new state pension. That many such people believe wrongly that they are disadvantaged is in part a failure of Government communication.

Women born between 6 April 1951 and 5 April 1953 will not be eligible for the new state pension in April 2016, whereas men born on the same dates will. This is the consequence of introducing the new state pension during state pension age equalisation. The complaints of the 1951–53 cohort are founded on the misconception that they would get the full flat rate of £155.65 if they were given access to the new state pension. That is simply not the case. The majority of women in this cohort will receive more in state pension payments across their lifetimes within the existing system than men of the same age in the new one. In addition, the existing generous deferral scheme would enable many such women, if they chose, to take a state pension at age 65 higher than that received by their male contemporaries. These realities should have been better communicated to this group, as was recommended by our predecessor Committee.

Three groups in particular stand to receive less in the early years of the new state pension than they would notionally have received under the current system: • people with fewer than 10 years of qualifying contributions; • people, largely women, who would currently derive rights to a pension based on their spouse’s contributions and are not covered by transitional protection; and • people who built up large guaranteed minimum pensions during the period from 1978 to 1988 and will reach state pension age during the early years of the new state pension.

The losses are largely products of the simplification of an outdated and extraordinarily complex system. It is those complexities, however, that make explaining the consequences to those affected imperative. People who understand their individual circumstances are better placed to adapt their plans in their best interest. Government should not rely on general awareness campaigns or happenchance in promoting that understanding. It should focus on identifying the individuals affected, assessing their potential losses, and communicating with them.

The Department has rightly upped its efforts to explain the more complex elements of the reforms and made clear headway in establishing an online system for state pension statements. The Pensions Minister should take credit for this progress. Though the Government will need to ensure that those without access to the internet, or who are uncomfortable using it, are adequately informed, online provision of personalised pension information will clearly become increasingly important.

The Government aspires to promote greater private pension saving. In order to best plan for retirement, individuals need to see a complete picture of their state, workplace and personal pensions in one place. We therefore welcome the Government’s commitment to ensuring the creation of a pensions dashboard by 2019. This is in line with our previous recommendation. Achieving it will be challenging and we will continue to monitor progress closely.

We recommend that, as a matter of urgency, the Department write to people it projects will reach pension age with: • fewer than 10 qualifying years; or • lower state pensions than they would have derived from a spouse’s contributions under the existing system; or • gaps in their contribution record. These letters should clearly explain the person’s circumstances and set out both projected entitlements and means of improving them. Though some letters will go astray, the benefits of this approach exceed any risks. We further recommend the Department work with pension providers to write similarly to individuals who built up a guaranteed minimum pension during the period 1978 to 1988. If the Department has any doubts regarding the lawfulness of such letters under the Data Protection Act 1998 it should seek the advance approval of the Information Commissioner.

We recommend the Government provide a new state pension telephone hotline service for the recipients of these letters. This service should enable claimants to discuss with an expert a strategy for increasing state pension entitlement that is most appropriate for their individual circumstances. This service might be provided by an existing pensions guidance service.

The Government’s pensions strategy is predicated on people engaging more with their pension savings and better planning for retirement. By relying on individuals requesting a state pension statement or generating one on a website, the Government risks missing those it most needs to reach.

We recommend the Government sends automatic state pension statements to all people aged 50 and over. These should be issued annually, in line with the private sector. Individuals should be able to choose to receive their statement by email or opt out on the digital statement system. Such individuals should still be informed by post of any major policy changes that affect them.