State pension statements must be improved, say MPs

11 January 2016

The government must improve the way it communicates details of the state pension, following the publication of a damning new report from the DWP Select Committee.

The Select Committee announced that it was to investigate how the government had communicated changes to the New State Pension in October last year, amidst concerns that those retiring on or after 6 April 2016 did not understand the new scheme.

How will the new state pension affect you?

In the interim report, the group of MPs said it was concerned that changes to the state pension have not been adequately communicated and that existing state pension statements are not presenting retirees with the information they need, in a way that they can understand it.

In particular there is concern that claimants do not fully understand the impact of contracting out on their state pension entitlement and that rapid increases to state pension age for women have not been adequately communicated.  The report said it had received “alarming evidence about the lack of notice and information provided to women about their state pension age”.

Before it completes the inquiry the committee has called for the following changes to be made to state pension statements immediately:

  • Statements should be limited to one page.
  • Key messages must be highlighted in a box.
  • The current value of the state pension that has been built up, state pension age, the date that will be reached and information on building up additional benefits must be prioritised.
  • State pension age must be highlighted in a prominent position, especially if that age has changed.
  • It should be easier to get further information.
  • Replace the term ‘contracted out pension equivalent with ‘contracting out deduction.
  • Explain what the contracted out deduction is, making it clear that it is a result of paying less NI and that it may be compensated for via a private pension.


The report said: “The Government is right to want people to engage more with their pensions. Central to achieving this is making pensions more approachable. At a crucial time of reform to the state pension and the state pension age, DWP statements are insufficiently clear. This lack of clarity increases the chances that people misunderstand the value of their state pension or the age from which they will receive it. In turn, this increases the chances that they will not best plan for their retirement.”

Tom McPhail, head of retirement policy at Hargreaves Lansdown said that although the changes to the state pension were necessary, it has failed to fully consider the implications.

“Successive governments have given inadequate consideration to the impact of these changes on individuals and how they should be communicated. Even now, just a few months before its launch, the present government is scrambling to get its New State Pension statements fit for purpose.

They have had years to prepare, in some cases decades. This poor decision-making and complacency regarding the importance of good communication, have undermined what were fundamentally good policies."


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