October 25, 2016 - Latest: Pensions – sounding the retreat? by Steve Herbert

State pension – Government agrees to write to those with fewer than 10 qualifying years but rules out writing to everyone

22nd June 2016

The Government has agreed to write to members of the public who do meet the minimum qualifying period to receive the state pension of 10 years of national insurance contributions but it has ruled out writing to everyone.

This group of around 100,000 people will include those who previously would have received a derived pension from their spouse. However the Department for Work and Pensions has ruled out writing to all the over 50s setting out their full pension entitlement.

The DWP has offered the concession in its response  to the Work and Pensions Committee report on the state pension changes. The committee had asked the Government to write to people approaching retirement annually.

Pension experts have joined the call on the Government to write to everyone not just those who don’t qualify for the full pension.

Steven Cameron pension director at Aegon said: “We warmly welcome the Government having agreed to write individually to the estimated 100,000 individuals who don’t have sufficient NI contributions to qualify for the new state pension. It is vital that this group understands this as early as possible rather than facing a shock at state pension age. Some may be able to take steps to improve their retirement prospects either through paying extra voluntary NI contributions or by contributing to a workplace or private pension.

“But this is just a first step and we urge the Government to go much further and write directly to every individual to provide them with an estimate of what state pension they are on target to receive. This should then be updated periodically. Our research shows that millions of individuals have no clear understanding of how much or how little they may receive as a state pension. While people can now request a projection, the majority will not think of doing so. Sending out individual personalised state pension forecasts would mean individuals could look at these alongside their private pension forecasts, take stock of whether they are doing enough for the retirement they aspire to, and if not take early action.”

The DWP says that it had issued over 850,000 new State Pension paper statements between September 2014 – April 2016, giving personalised information to individuals, predominately to those reaching their State Pension age in the next 10 years.

It says there have also been over 300,000 unique visits to the online Check Your State Pension beta service between 12 February 2016, when it was introduced, and 30 April 2016.

The Department has also issued tracker survey data provided by Ipsos MORI which shows that for individuals who are 10 years from State Pension –

71% (from 57%) say they have specifically heard of the new State Pension replacing the current basic and additional State Pensions

84% (from 74%) know about the minimum number of years of National Insurance record needed to receive State Pension

65% (from 37%) are aware that contracting-out is ending

In terms of the new letters, the government response says: “We have established that it is possible to identify individuals who are now within 9 years of State Pension age and whose National Insurance record suggests that they will not have 10 qualifying years of National Insurance contributions when they reach their State Pension age.

“Subject to normal testing, we propose writing to this group as a one off exercise, integrated into the overall awareness campaign. This will test whether direct mail is more effective for this group given we can identify them and we believe it is possible to formulate a clear message and call to action. We estimate that in the UK there are over 100,000 people within this group. We will evaluate this exercise to gauge its efficacy.”

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