MPs have launched an investigation into the new state pension, due next April. They’re concerned that many of those affected by the changes don’t know what they will mean for their pensions, especially people who are close to retirement and may have done most or all of their retirement planning and saving under the existing system.
While many people are expected to be better off, the Works and Pensions Committee warns that people with less than 10 years of National Insurance contributions, for example, will no longer receive any state pension, and people will no longer be able to count on a percentage of their spouse’s pension after their death.
“In addition there is a group of women born between 1951 and 1953 who feel particularly aggrieved by the way they are affected by the transition to the new state pension,” pointed out Frank Field, chair of the committee.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “No-one disputes that the transition from the current system to the new one will involve complex adjustments. What is incomprehensible though is that until recently the DWP seems not to have made any meaningful plans to communicate these changes to the people who are actually affected by them.”
The removal of additional state pension (S2P) is the reason most will be worse off under the new system, said Chris Noon, partner at Hymans Robertson.
“Under the current regime, although basic state pension accrual is limited to 30 years, additional state pension can be accrued over an entire working life, potentially up to 50 years. Under the new system it will be capped at 35 years with no additional state pension so there will be less scope to build up a more generous entitlement.”
The committee has invited written evidence on the way the government has communicated the changes, and the problems people are facing in understanding the changes.Reuse content