If the complexity of the State Pension isn’t going to change, then the DWP must change how it communicates with people.

You may have picked up that all of a sudden State Pensions in the UK are generating an undercurrent of comment and unrest. So, what is all the fuss about? Well actually, there are two distinct things going on:Firstly, in April this year the State Pension age for women will be 63, a three year increase from the long-time established age of 60 since it started going up from April 2010. That has crept up on everyone hasn’t it! From here on in, due to the changes made by the Coalition government in 2011, the pace of change accelerates, such that by November 2018 women will reach parity with men at 65 – but also from there we increase to 66 for both sexes by 2020, with more increases to follow longer term to 67, followed by five yearly reviews for longevity improvements thereafter. Of course all this has been known for a while, and is freely available in a nice table on the government website (www.gov.uk), so what has been the problem?

‘Although available on the Government website if you go and look, for the average person in the UK, pensions remain an impossibly complex subject with no long term period of time without constant change which continues to bring apathy, confusion and in some cases genuine fear to try and understand. This week the House of Commons Work and Pensions Committee reported that it had ‘heard widespread concerns that women were unaware of increases in their state pension age that date back to 1995. This included some women who recalled official correspondence in the interim’ there are stories of women quoting surprise and horror as the realisation dawns that they will have to work a number of years (in some cases, six) more than they had been planning. Whilst the better communications, which that Committee are calling for, would not have changed the position (that is a separate argument and worthy of debate – there appears general agreement on equalisation of ages, but a distinct concern at the pace of change which has impacted on women), they would have undoubtedly have better managed the expectations of the millions of women impacted by these changes.

‘The second issue is of course the introduction of the new State Pension for all those people who reach their State Pension Age on or after 6 April 2016 (so if you reached your State Pension Age before then, don’t worry – you will see no change). What’s the issue here – isn’t it just £155.65 per week for everyone who retires after that date? Well no, not quite. The £155.65 is the headline grabbing figure but actually the reality is different. Firstly, that figure requires a National Insurance record with 35 years of contributions (it was 30 for the Basic State Pension). So, you are not only going to receive your State Pension later but are going to have to work for more years to get it. This increase from 30 to 35 years is likely to impact more on women who are already unhappy with the increase in their state pension age.  Plus, anyone who has at any stage in the past been contracted out of the Second State Pension (or previously SERPS) will see a reduction in the amount they will receive. Inevitably, as we have seen, what follows is more outcry from people claiming to have been misled as they start planning for their retirement post April this year with a lower than expected pension.

So, what needs to be done? If the base position of complexity is not going to change then the DWP must change how it communicates with people. Simple, clear, concise and engaging communications, on one page with lots of colour and big bold boxes with our State Pension age and expected pension are massively important, but are not the only answer. We need to engage with people at all levels and, dare I suggest, think of how we can follow up with them to make sure the message is understood. As pension professionals, whether in industry or working for government departments, we are used to the detail, the small print, and we have a good base level understanding of the subject matter. We should never lose sight of the fact that the general population, and in particular the low to medium earners who rely so heavily on their State Pension in retirement, are not used to any of those things. They work hard and contribute to society their whole working life and then retire only once so a massive life event completely alien to them. We need to find ways to communicate, educate and engage on those terms. The concerns expressed on the State Pension Age and the New State Pension should serve as a wake-up call to the DWP and to us all.