Written evidence from Later Life Ambitions (USP0133)

 

Later Life Ambitions welcomes the opportunity to provide written evidence to the Work and Pensions Select Committee Inquiry into Understanding the New State Pension.  We have focused our evidence on the areas where we have specific experience and have received feedback from our members.

 

About Later Life Ambitions

 

  1. Later Life Ambitions brings together the collective voices of over a quarter of a million pensioners through the National Federation of Occupational Pensioners, the Civil Service Pensioners’ Alliance, and the National Association of Retired Police Officers Association.

 

  1. By 2030, there will be almost 13 million people in later life - aged 65 or over. We are working to encourage today’s decisions-makers to confront the challenges of tomorrow.

 

  1. We have been asking the Government to consider transferring existing pensioners onto the New State Pension on a ‘no detriment’ basis. Those on the New State Pension will have the entirety of their pension protected by the triple lock whereas current pensioners do not. Their basic state pension is protected by the triple lock but any top-ups such as the second state pension are not. This is clearly unfair, and whilst this consultation focuses on the communication issues around the new state pension, we would like the Committee to bear this issue in mind. Moreover, most pensioners are unclear about how the triple lock operates with regards to income such as the second state pension and the Government has failed to communicate this clearly.

 

  1. Other issues that are important to our members include protecting pensioner benefits such as the bus pass which enable our members to enjoy a fulfilling and active retirement. Social care is very important to our members and we want to see sustainable and significant funding of social care. We also support the building of homes designed specifically for older people.

 

Does the current campaign to raise awareness adequately prepare individuals for the upcoming changes?

 

  1. There are number of changes being introduced as part of the new state pension, including how people will qualify for the state pension and the amount they will be paid. In our view the current campaign has not adequately raised enough awareness to help individuals understand the upcoming changes. This is because the new state pension was initially sold as ‘flat rate’ or ‘single tier’ pension and then this was changed when it became clear individuals will receive different amounts of money. This change was not fully explained to the public and led to confusion about how the new state pension will work.

 

  1. All three partners in the campaign have received a significant number of questions from our members in regards to the New State Pension. In particular, despite the fact that many of our members will not be affected by the New State Pension, they are not clear about whether they will be affected. A number of polls have also reflected this with a Saga Populus poll (November 2014) finding that 53% of people were unsure whether, if someone reaches the state pension age before April 6 2016, they will qualify for the new state pension. This data is echoed by the Department for Work and Pensions’ own survey published in September 2015 which found that 62% of those who will reach state pension age within five years of April 2016 did not feel they knew how the new state pension changes will affect them. The campaign by the Department for Work and Pensions needs to go much further in reassuring current pensioners that they will stay on the current system.

 

  1. We know from our experience that a number of current pensioners still believe they will be entitled to the new state pension and will be better off because of this. NFOP estimate that around half of their members are not clear that the new state pension does not affect them. Those pensioners who do understand that they will not receive the new state pension feel that they are being unfairly treated and that new pensioners will be considerably better off.

 

  1. In addition to being unclear about whether they will qualify for the new state pension based on age, there has also been extensive confusion about the amount people will be paid. This has centred on how much individuals can expect to lose from the new state pension as a result of years spent ‘contracted out’. The Department has repeatedly failed to provide clear information on this. Whilst individuals approaching retirement age can request a statement about how much they will receive, the formula for much contracted out years impact on the final amount received by an individual has not been made clear. The Government should explain how this is being calculated as a priority in order to allow people to understand why they are receiving a particular amount.

 

How should the Department measure the effectiveness of the campaign?

 

  1. The Government need to recognise the needs and preferences of older people in order to accurately measure the effectiveness of the campaign. Organisations such as the Later Life Ambitions partners are well placed to survey their members and gather accurate data. Therefore the Department should be engaging with organisations such as NFOP, CSPA and NARPO who have relationships with the broader pensioner movement and can provide trusted advice to their members.

 

  1. The amount of time taken to properly gather the views of pensioners should also be considered. Many pensioners are wary of telephone surveys and not all pensioners have access to the internet or are confident online. Paper communication remains the best way to interact with pensioners but this is slower than some other methods. The Later Life Ambitions partners could ask members for their experiences through our quarterly magazines but we would expect to give members at least a month to six weeks to respond and we think the Department should use suitable timescales for measuring effectiveness.

 

Is the additional information provided to those approaching State Pension age (those aged over 55) sufficient?

 

  1. We believe that the arguments outlined in this submission about the inadequacy of the information supplied about the new state pension apply more pointedly to those in this age bracket.

 

Is targeting the over 55s for more additional information about the State Pension reforms sufficient or should this be expanded to include a wider age range and/or other groups?

 

  1. We think that additional information should be targeted at those currently receiving their state pension. This information should make clear to them that they will remain on the current system. However, this should be caveated with the point that we, like many others representing pensioners such as AgeUK, believe the Government should urgently look into allowing current pensioners to be bought into the new state pension without any detriment to current rights. As it stands the new state pension will create a ‘two-tier’ system and we are worried those on the old scheme will no longer be considered in new policy decisions.

 

  1. We think additional information should be provided to current pensioners. We think this could be done quite easily as pensioners receive a statement every April setting out their pension and benefit entitlements for the coming year. In 2016 this communication could contain an additional leaflet or letter explaining to current pensioners the impact of the new state pension on them.

 

To what extent are Department communications addressing the needs of specific groups who are affected differently, such as women born between 6 April 1951 and 5 April 1953?
 

  1. There also appears to be a lack of understanding among women who will be adversely affected by the introduction of the single tier state pension.

 

  1. Whilst we support the ability of individuals to build up an individual NI contributions record over time, this group of women will be unfairly disadvantaged. There is a creeping realisation of how the changes from the Single Tier Pension will affect them, from information in the media and campaign groups such as WASPI (Women against State Pension Inequality) Disappointingly, there seems to have been a lack of communication from DWP to this group, both when the changes were initially planned and as they have been implemented.

 

  1. Although this consultation is about communication on the changes to the State Pension, we would also like the Committee to bear in mind that this section of the population will experience a considerable impact on their retirement income, through the increase in qualifying years from 30-35 years of full NI contributions, the imposition of a minimum of 10 years contributions, the increase in state pension age, deductions to the Single Tier State Pension through opting out, and the inability to rely on a spouse’s NI contributions.

 

How could workplace pensions be used to signpost people to information about their State Pension?

 

  1. There are both risks and benefits to using workplace pensions to signpost people to information about their State Pension. The risk is that by using workplace pensions to signpost to the State Pension that people will conflate the two and be unable to differentiate between money being provided through their workplace or occupational pension and money being provided by the new state pension.

 

  1. However, it is important for people to understand the amount of money they can expect to receive in retirement. We are concerned that many people believe that although they will have to work longer than earlier generations this will ‘pay off’ when they receive a more generous state pension. In reality many pensioners and future pensioners would struggle to survive on the new state pension alone and it would certainly require a dramatic change in lifestyle for many people. Therefore talking to people about the new state pension in the workplace may be a good way to highlight to people how much extra they need to save in order to achieve the lifestyle they want in retirement.

 

Should employers of those in contracted out pension schemes be providing their employees written information about the state pension reforms when contracting out ends in April 2016?

 

  1. Given the existing confusion about the impact of contracting out on the final amount people will receive for their state pension, we would strongly support this measure. However, as outlined above we believe action needs to be taken now to deal with those who are unsure how much they will receive.

 

Further information and contact details

 

  1. The founding members are the National Federation of Occupational Pensioners (http://www.nfop.org.uk/), the Civil Service Pensioners’ Alliance (http://www.cspa.co.uk/) and the National Association of Retired Police Officers (http://www.narpo.org/).

 

 

November 2015