“Communicating the changes was always going to be a challenge given the complexity of the transitional arrangements for moving from the old system to the new, notably in relation to the deductions that had to be made to the starting level of the new pension to take account of NI reductions and rebates for past periods of contracting-out of SERPS.
“Peoples’ expectations were initially incorrectly raised by talk of a new “simpler, flat-rate, more generous” state pension, none of which in the early years is likely to be the case. In fact it is now estimated that roughly one and a half million individuals who will reach state pension age in the next ten years will get less than the full rate (currently £155.65 a week), even if they have the full 35 years or more NI contributions. Subsequent communications from the DWP purporting to explain the contracting-out deduction were also often too technically oriented and may not have always resonated.
“The NAO’s comment that it is not yet clear whether the simplification of the state pension will support wider pension reforms and encourage people to save more for their retirement is also of note. The constant pushing-back of the state pension age makes retirement a distant dream for today’s younger generation and the prospect of a simpler (albeit for most by 2060 less generous) state pension is unlikely to alter that. Also the gap between the levels of the full new state pension (£155.65 a week) and the Pension Credit threshold (£155.60) is so marginal that it calls into question the claim that the new pension would provide a foundation for private saving without the worry of overlaps with means-tested benefits. That has plainly yet be achieved on the basis of current rates.”
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