Tag Archives: Steve webb

Revealed: The great public ignorance about your state pension

Posted on by
State pension banner when the new pension came into force in 2016

One of the key complaints made by the 3.6 million 50s born women is that they didn’t know about the six year delay in the rise of the pension age for women from 60 to 66 until it was too late. This along with direct discrimination against women caused by the absence of a level playing field with men for that generation of women to pay national insurance contributions is behind this long battle with the government.

Now a report published today and sent to me reveals that these 3.6 million women are by no means alone. It implies that the majority of people in the UK today have little knowledge or understanding of how the state pension system works. A research report from the Policy Institute of Kings College, London commissioned for Phoenix Insights, a think tank for a large savings company, reveals that many people have misconceptions about the system. When these are pointed out they are unhappy about the current level of the pension and are concerned about how vulnerable people can live.

The research is not based on mass questionnaires but by taking 100 people in London and Birmingham and giving them detailed information at workshops after receiving a talk from former Liberal Democrat pensions minister Steve Webb. This enabled them to put forward policy changes they would like the government to enact.

Steve Webb gave a presentation to the group

The biggest misconception comes from how people think they have built up their pension. Some, believe it or not, think they just get an automatic full pension, when they reach retirement age provided by the state. One said: ““I thought when you retire everyone is entitled to the pensions. I don’t know why…I thought this is what happens.”
 But the majority believe by paying national insurance contributions all their working lives they have built up their own personal pension pot which they are entitled to get when they retire. This is a complete lie. Their money is instead used to pay people already retired to get a pension.

People are not stupid about state pensions – just misled

People are not stupid in believing this because the way the scheme works makes it look like that. Your level of pension depends on your national insurance contributions and you don’t get anything until you have made ten years contributions and only a full pension after 35 years. Anybody who contributed to a private pension scheme. would think that because that is the way they work..

Rather worryingly nearly half the people thought they had a a basic knowledge of how the pension system works and were embarrassed when they realised they didn’t.

When all this had been explained to them, the report reveals people thought the present system did not deliver an adequate pension for everybody.

As the report says: “The study identified five main knowledge gaps covering most of the core elements of how the state pension system works: the number of years of National Insurance contributions needed to qualify for the full state pension, eligibility criteria, the value of payments, what the “triple lock” is, and how the state pension differs from workplace savings.”
 The people’s conclusion was that the state pension was inadequate for anybody to live on without being able to top it up with a workplace pension, a private pension or property assets. Some retirees among the 100 people said unsurprisingly that the cost of living crisis had made a big impact.

People also thought that vulnerable people needed more help -particularly those with health issues who could not work – and either the level of benefit should be higher or they should be able to draw a pension earlier than the official retirement age.

People had bought into the government’s argument that the retirement age should rise because people are living longer – even though at the moment longevity has stalled and started to fall in poorer areas.

Phoenix Insights said: ” When we talk about longevity, we are looking at a long term view of life expectancy in the context of comparing to previous generations. Long-term life expectancy improvements mean that the pensioner population is projected to increase by over 5 million, rising from over 12 million today to over 17 million by 2070 (DWP, 2023).”

I thought this report is rather damning of the failure of successive government to explain how the state pension works or so many people would not be so ignorant. And it might suit governments that this remains so – or it would create a groundswell for much higher pensions.

But it is also a damning indictment of the minority of people who try and blame the 50swomen for not realising about the pension changes that have left so many people in poverty. They may well be the very people -unless they are pension experts – who are ignorant themselves and get a shock when pension day dawns.

One-Time
Monthly
Yearly

Make a one-time donation

Make a monthly donation

Make a yearly donation

Choose an amount

£5.00
£10.00
£20.00
£3.00
£9.00
£60.00
£3.00
£9.00
£60.00

Or enter a custom amount

£

Your contribution is appreciated.

Your contribution is appreciated.

Your contribution is appreciated.

DonateDonate monthlyDonate yearly

please donate to Westminster Confidential

£10.00

A scandalous cover up: The DWP and Ombudsman let down millions of people promised an indexed Guaranteed Minimum Pension for life

Posted on by
Steve Webb, former Liberal Democrat minister, who piloted the change in pension law in 2014

Only two people given a total of £1250 compensation out of millions who lost out

This is a complicated story but bear with me. Under the old pension arrangements (abolished in 2016) employers who decided to contract out of the old SERPS scheme would save on their national insurance contributions (NICs) but promised whatever happened they would still maintain a Guaranteed Minimum Pension for their workers.

But they would not pay for the indexation of the pension once people retired. That money would be paid by the state. and still is for those who have the old state pension.

But from 2016 with the introduction of the new pension that would cease with the exception of people who received an occupational second pension in the public sector – and that includes ministers, MPs, civil servants as well as other public sector workers. This exception even covers any public sector worker who moved abroad to places like Canada and Australia where their basic state pension is frozen.

This change which could lead to people losing thousands of pounds over their retirement – was spotted independently by two knowledgeable people who having got nowhere with the Department for Work and Pensions complained to the Ombudsman. 11.5 million people affected had opted out of the scheme between 1978 and 1997.

Some 21 months ago the Ombudsman reported that they had been right to spot this. The report noted:

“The National Audit Office (NAO) and the Work and Pensions Select Committee considered that the DWP had provided insufficient and limited information to individuals about the potential negative impacts the new State Pension could have, particularly in relation to indexation on the GMP. The NAO said that some people were likely to lose out and could not find the information they needed.

DWP information was misleading

It concluded:

“The DWP communicated the impact of the 2014 Pensions Act legislative change to the public. ln communicating this change, the DWP said that individuals could increase their starting amount of new State Pension. However, people who were to reach SPA shortly after April 2016 were in fact unable to make significant additional NlCs to do this. The DWP’s information was thus misleading.”

Indeed the DWP gave the impression that the change would make a mere 36p a week difference when in fact people, especially women, would lose over their course of their retirement, thousands of pounds. It is very difficult to estimate how much, but a Treasury estimate on how much money those in the public sector will GAIN by keeping this right – suggests, if inflation stays at 2 per cent, it is £13,000 for every man and £18000 for every woman over their average life span. If it is 3 per cent, it is £19,000 for a man and £27,000 for a woman. Not 36p!

Once they had retired they could do nothing about it. The Ombudsman’s report says that between 2016 and today two million people have already been affected. The bulk of the people have still to claim their pension.

The ministry to confuse matters said that the new triple lock provisions for the basic state pension meant that on average people affected would only be between £2 a week worse off and £4 a week better off. But in fact that has nothing to do with the indexation of GMP, it was part of package of measures for the new pension.

Rob Behrens, Parliamentary Ombudsman

If that change wasn’t bad enough the last 21 months nothing has happened. The Ombudsman made straightforward recommendations and wanted the ministry to report back in three months. He was ignored.

“The DWP should ensure that their literature clearly and appropriately references that some individuals, who have large GMPs and reach State Pension Age in the early years of the new State Pension, may be negatively affected by the changes.
“The DWP should direct individuals to check their circumstances. Further, the DWP should provide details to the public about how they can check their circumstances.. We have recommended that the DWP should ensure that anyone with a complaint of injustice arising from the same maladministration can have their concerns fully considered.”

Ombudsman has no power to compel the DWP to redress the injustice

Well so far the DWP has only offered to produce a fact sheet and not made any attempt to contact a single person who was misled . And the Ombudsman – who has no power to compel people to follow his recommendations – looks like letting them get away with it by agreeing to the offer. So only two people – the complainants Mr Smart and Stephen Kenny – have been compensated -offered £500 and £750 each respectively.

Despite some heroic efforts by Stephen Timms, the chair of the Commons Work and Pensions Committee and some questions from me the ministry has stonewalled in providing detailed information. Both the Ombudsman and the DWP are also silent on how the law was changed in 2014 -since the money was paid out before under the old system and those in public sector rather than the private sector now get it through their occupational pension.

Some readers might find this story eerily familiar. If you are a 1950s or 1960s woman it sounds like a rerun of the denial of pensions to millions of women between 60 and 66. Misleading information, nobody being told, and then no redress.

But there is also something alarming in this tale for the WASPI women who have placed their faith in the Ombudsman to save them. First compensation for the potential loss of tens of thousands of pounds is just £500 and £750. Secondly it could suggest if maladministration is proven that the DWP will just compensate the six women involved in the complaint and ignore the rest of the 3.8 million. Thirdly it looks like the DWP may ignore the Ombudsman’s recommendations -knowing he can’t compel them to do anything – or make it so difficult and obtuse for the women to claim that they will get nothing. After all you can’t prove you never had a letter!

A thank you to one of my readers Christopher Thompson who contacted me about this and helped with unearthing some of the key facts in this story.