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Understanding concerns about the new state pension system

This year was expected to see a brave new dawn for the UK state pension, with the introduction of a new flat-rate scheme due on 6 April. This is supposed to replace the current mixture of basic pension and S2P (state second pension) with a more generous, universal payment.

But over the last few months, it has increasingly become clear that many people who reach pensionable age in or shortly after the new system launches could end up with less money than they thought.

Criticism from DWP

Questions have been raised over the way the government has communicated the changes, and this week the Department for Work and Pensions Select Committee added its voice to the criticism. The committee said that the new pension is “widely misunderstood” and added that the transition was being carried out too quickly.

Adding to the confusion, the committee added, was the fact that civil servants were issuing often contradictory information and guidance to members of the public. If DWP staff don’t understand the changes, what hope do the rest of us have?

Ministers come under pressure

Meanwhile, ministers are coming under more and more pressure to make life easier for hundreds of thousands of women who face having to wait longer than expected to qualify for their pensions.

The Women Against State Pension Inequality (WASPI) campaign was set up last year to address the fact that many women born in the early 1950s are being forced to delay retirement due to two pieces of legislation.

Moving the retirement age (twice)

The first, which was passed back in 1995, said that women’s retirement age – which for years had stood at 60 – should rise to 65, in line with men’s, between 2010 and 2020. But in 2011, the coalition government passed an Act which said that both men’s and women’s retirement age should in fact rise to 66 by 2020.

This means, for example, that many women who had expected to retire at 64 or 65 towards the end of this decade will have to wait an extra year or more on top of the delays they have already suffered.

A lack of information

WASPI has launched a petition to seek a fairer transition period – it has so far received more than 115,000 signatures – and last week a House of Commons debate covered the issue. The case presented by WASPI echoes the DWP Select Committee’s criticism of the new pension scheme: the campaign’s main contention is that successive governments have failed to keep women properly informed about the forthcoming changes to their retirement age.

As a result, many of them have missed the opportunity to plan their finances accordingly.

Calling for quick and decisive action

No one is arguing that the government has been wrong to increase the pension age or to reinvent the state pension. People are living longer, healthier lives these days, so retirement ages should reflect this. And the state pension as it stands is complicated, confusing and crying out for reform.

The problem is that there seems to be a lot of collateral damage in the way these changes are being implemented. With the WASPI campaign gaining increasing amounts of publicity and only a few weeks left until the new pension is supposed to come into force, there is considerable pressure on ministers to act decisively and quickly.