Call for clarity on pension changes

The Government must do more to explain how people will be affected by the shake-up of the state pension system, a committee of MPs has warned.

The success of the simplified flat-rate state pension, which will come into effect in April 2016, hangs on the Government stamping out any confusion over the changes sooner rather than later, the Work and Pensions Committee said.

The new single-tier pension will affect about 40m people of working age and be worth around £144 a week in today's money. It will run alongside the Government's initiative to automatically enrol people into workplace pensions to encourage more to save for their retirement.

Report recommendations

In its report, the committee argued that it is 'vital' the Government addresses how it will communicate the changes by the time the Pensions Bill comes before Parliament in early summer, including how the internet can be used to explain how people will be affected.

The report said: 'It's particularly important that groups of people who may lose out, or who believe that they may lose out, are given accurate information so that they can assess whether they need to take remedial action, which might include making additional National Insurance contributions.'

The committee warned that, although the system will be simpler in the long term, its roll out will undoubtedly hit a few teething troubles.

Ultimately, the reforms are intended to reduce people's reliance on means-tested benefits and give them more confidence about the benefits of saving into a private pension scheme.

Pension misconceptions

The report said there are already several 'misconceptions' about who stands to gain or lose from the changes and it is important that concerns are 'allayed as far as possible by the provision of accurate and understandable information'. It agreed that those closest to retirement have the most immediate concerns.

The committee found that many people wrongly believed the reforms would mean everyone received a state pension of £144 per week because they did not yet understand the criteria for entitlement to the full amount. Others feared they may lose any higher state pension entitlement that they had built up.

Committee chairwoman Dame Anne Begg said: 'It is vital that the Government decides on its high-level strategy for communicating the changes to the public by the time the finalised bill comes before Parliament in the summer.'

Copyright Press Association 2013