MPs warn too few people understand the new state pension

In particular the government has not made it clear that most people retiring on the new state pension will not receive the £155.65 weekly rate, the work and pensions committee said.

Under the change, 13 per cent of those reaching state pension age in the first year of the new state pension will receive the flat rate of £155.65. Some 32 per cent will receive more and 55 per cent will receive less.

“The new state pension will ultimately be a welcome simplification of an over complicated system. The problem is that failures of communication mean that too few people understand it. The government seems to have managed to muddle its communications to the point where neither the winners nor losers yet know who they are,” Frank Field, chair of the committee, said.

He added: “There is no way that communicating changes which affect different groups very differently, over different timelines, should ever have been left to general awareness campaigns or happenchance. The oversimplified message about the flat-rate amount has left many people unprepared and confused.”

The committee has urged the department for work and pensions to write to those people who stand to receive less in the early years of the new state pension than previously or have gaps in their contribution record, and clearly set out the person’s circumstances, the projected entitlements and the means of improving them.

And the government should provide a new state pension telephone hotline service for the recipients of the letters, with experts available to discuss the strategy for increasing state pension entitlement that is most appropriate for their individual circumstances.

Paul Green, director of communications for retirement experts Saga, expressed dismay at the findings: “It is simply untenable that those approaching retirement can be treated with such disregard when it comes to their pension income. Most people make significant financial plans about their future based on what they believe they will get from their state pension and if inaccurate or outdated could leave them with little to no time to make up for this government information error.”

Meanwhile, Kate Smith, head of pensions, Aegon UK, said:​ “To give people absolute clarity, the government needs to send everyone personalised statements setting out what they get from the state just like the pension industry does for private and workplace pensions.”

The recommendation comes after the committee warned in January that millions of people may be planning their retirement based on wrong information as details sent out about when people will get state pensions and how much they are worth were “inadequate” and “confusing”.

New research from Aegon UK has also highlighted that the vast majority of the UK public remain in the dark about the scheme, including how much they are set to receive when they retire. Aegon found that 28m people are unsure how much new flat rate state pension will pay.

Two thirds of the 4,000 working age people surveyed were unable to accurately identify the new maximum state pension payment of £155.65 per week, with a third thinking the weekly payments will be higher.