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Flat rate state pension will cause new political storm

The furore over women's state pension age increases will be nothing compared to grievances new flat-rate state pension will cause.

Flat rate state pension will cause new political storm

The state pension has become a battleground and this week pensions minister Ros Altmann will find herself more directly in the firing line than ever before when she gives evidence on state pension age rises and the incoming flat-rate state pension, to the work and pensions committee of MPs.

One campaigning voice in particular has become extremely loud, that of the Women Against State Pension Inequality (Waspi) whose cries of injustice regarding steep increases in women’s state pension age (SPA) have won them a chance to have the issue formally debated in parliament.

But aside from the bluster, what are the real injustices in the state pension system? In truth, the new state pension will face its own charges of being unduly harsh to women.  

Women born in the 1950s are campaigning for compensation for the loss of their right to a pension at 60 due to the equalisation of men’s and women’s pension ages in the 1995 Pensions Act, which they say the Department for Work and Pensions (DWP) failed to tell them about in good time.

On 7 January, in a backbench debate sponsored by the Scottish National Party’s Mhairi Black, MPs voted unanimously that the two-year acceleration of men’s and women’s pension age equalisation imposed in the 2011 Pensions Act was unfair to some women born in the 1950s. Black argued it in fact worsened historic gender inequality. 

But this will be nothing compared to what is to come.

In April 2016, the new state pension comes into force, and there are already complaints of unfairness.

Under the new state pension, anyone with less than 10 years’ national insurance (NI) contributions will not qualify for a pension at all. This will affect people who have become UK residents late in life, and people who have spent long periods in prison. It will also affect women who were housewives for most of their adult life but did not qualify for NI credits, together with some older women who paid the reduced ‘married woman’s stamp’.

Since the new state pension also ends the right for married women (or men) to claim their spouse’s pension after his (or her) death, a few of these women could end up with no state pension at all, though they may be able to claim means-tested pension credit.

Deferring the state pension and/or making voluntary NI contributions are solutions, but for women on low incomes who are close to retirement age it may be too late.

Significantly more women will be affected by the rise in the number of years needed to qualify for a full state pension, from 30 to 35.

However, prior to 2007 the qualifying period was 44 years for men and 39 years for women. The new qualifying period is thus more generous than pre-2007 arrangements. The change is, however, discriminatory against women, since more women than men are likely to make insufficient contributions to qualify for the full state pension. I expect battles from women’s organisations over this.

Contracting-out confusion

Then there is the contracting-out problem. The new state pension was advertised as being a flat-rate pension for everyone. But for anyone who contracted out of the state earnings related pension scheme (Serps), their entitlement to the new state pension will be reduced by the contracted out amount just as it would have been under the existing system.

Admittedly, they can top up their state pensions – perhaps by drawing on their corporate pensions, as former pensions minister Steve Webb (pictured above) has suggested. But there is already considerable anger about the fact that the government advertised the new state pension as a universal flat-rate scheme when it is nothing of the kind.

There are also growing complaints over the transitional arrangements for the new state pension. It imposes a sharp cliff edge for people who qualify for the full state pension and retire on or before 5 April 2016. A man born 5 April 1951 will receive the current full state pension of £115.95 per week (£119.95 from April 2016). If he is born one day later, on 6 April 1951, he will receive the new full state pension of £155.65. An equivalent cliff edge applies to women born in April 1953.

Though for anyone who qualifies for the earnings-related state second pension, this cliff edge would be much less severe.

Deferring the state pension does not solve this problem. People dependent on the state pension can claim pension credit, which tops it up to £151.20 per week, but this is heavily means tested: those with corporate or private pensions, savings over £10,000, and those still working after state pension age, may not qualify.

There are calls for people close to retirement to be allowed to choose whether to retire on the new or the old state pension.

By far the biggest storm on the horizon arises from the fact the new state pension gives a large pension increase to new retirees while leaving existing pensioners dependent on means-tested benefits. 

Will they take their exclusion from the new state pension lying down? I doubt it.

Frances Coppola (pictured) spent many years working for banks and now writes and speaks about banking, finance and economics

46 comments so far. Why not have your say?

Keith Cobby

Jan 18, 2016 at 09:12

This is a great article, concisely summarising the pensions fiasco. It was obvious to readers of Citywire that these anomalies would be created. The current state pension can be considered to be flat rate to those who receive the maximum. Reductions are made for qualifying years and contracting out, exactly as they will be for the new pension.

The only fair way to introduce the new pension is to offer it to all based only on length of residency.

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Anonymous 1 needed this 'off the record'

Jan 18, 2016 at 17:06

I agree it is a comprehensive article but it needs to be made clearvthatbtofayscpostvehichday current 119 quoted is only basic pension, many get much more than this with Serps and earnings related supplements . Some even get more than 155 a week when all components are included.

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Pat Strong

Jan 18, 2016 at 17:09

It is good, but still leaves out two distinct groups. Those with SERPS, currently there is an inherited right of 50% to spouse, this will disappear, and those who contracted out they will not get their GMP increases, currently split between the Sears and private occupational scheme. Some people are added by both of these issues.

Unlike the wasps women (and I am ones often them) albeit little notice was given, with these two issues - no notice whatsoever. So whilst this is a good article, the author is probably completely oblivious of these grossly unfair withdrawals of accrued long standing pension rights. How can this happen?

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Maurice Green

Jan 18, 2016 at 17:38

It all seems very unclear to me, I was born 1936 and my wife was born 1933.

When the 2001 change to SERPS inheritance was made I received written assurance from the Dept of Work and Pensions that in the event of my death my wife would inherit 100% of my SERPS pension. Can anyone tell me if this promise is under threat.

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Jan 18, 2016 at 17:40

Good article but there are three other critical points:

1. Most new retirees will not get the new flat rate pension as from April this year - for several reasons the large majority will not. It will several years before the 50% line is crossed.

2. In the long term total pension entitlement is calculated to reduce - our children will be worse off. This is deliberate as the current structure is financially unsustainable - even without the triple lock - as the elderly population grows.

3. The deductions for contracted out schemes are unbelievably complex. They are designed to ensure that anyone with more than a few years in such a scheme will have little or no entitlement for a new flat rate pension. The total employer/employee NI contribution rebate is only 2.8% for such schemes from the usual 25.8%, but the methodology means that entitlement under the new scheme can come down to virtually nothing - so that people have to rely on the transitional arrangement that retains the old state pension level.

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Jan 18, 2016 at 17:50

There are so many inaccuracies and so much scare mongering in this article it is diificult to know where to begin!

1) Cliff edge? NO, most people have Serps/Serps2 which increased their 'old-style' pension, or were contracted out, which reduces their 'new style' pension. A FEW low earners may gace this, but a) would probably get pension credit and b) it was what they were always getting

2) Advertised that veryone was getting the full flat rate? NO! Not said at the time, loads of newpaper coverage about it at the time. Sampe papers now claiming they were 'misled'

etc etc

Seems very much the best plan that they could come up with

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Pat Strong

Jan 18, 2016 at 18:18

Hmmmm, have to disagree with you. Certainly not the best plan to take away accrued pension rights and not tell people. I wouldn't mind not getting what I expected if, and only if, they gave us notice. I could have made plans for the shortfalls. I have made irreversible decisions based on incorrect information. If this was a private scheme, it would be unlawful. We need to be able to trust the information given and it should be accurate and honest. Sadly, this is not the case in the examples I have cited. It's a disgrace for the state to act in this way.

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Pat Strong

Jan 18, 2016 at 18:27

Horshamtim, re ", but the methodology means that entitlement under the new scheme can come down to virtually nothing - so that people have to rely on the transitional arrangement that retains the old state pension level." that's absolutely right Tim. However, with loss of gmp increases and inherited SERPS (my husband who is in exactly the category you speak of) will be much worse off than expected. Simplification must not be taking away what is a pension right. If the DWP take away our money to give to others - that is simply not fair. No time to make up the losses as only one year till pension age and sensibly saved to retire early. So much for the sensible savers who thought about, planned and prepared for their futures. You just can't trust anyone. Also, of the 11 million better off under the new single tier system (mostly low paid or long term unemployed) surely they would have been to entitled to additional state benefits anyway? So they are not really winners, we are just losers. It's all a big con.

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Dennis .

Jan 18, 2016 at 18:51

I am currently getting £195/week state pension. Where did I go wrong?

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Law Man

Jan 18, 2016 at 19:20

1. Under 10 years NIC: it is fair that only >= 35 years NIC receive full amount, but it seems unfair that <10 years receive nothing. A person with just under 10 years should receive the pro rata £40+ p.w.

2. Deductions for contracting out are very unfair. In the 1980s we were encouraged to contract out on the basis we would be better off. The final fund from my Norwich Union contracted out policy will buy me an annuity of about 50% of the deduction in my state pension. If it were not for the fact that I shall receive an amount calculated under the "old" basis, I would be very much worse off.

There will be winners and losers, but you can understand why the losers complain.

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mark antrobus

Jan 18, 2016 at 19:58

Yet again we have been lied to by politicians. What was promised as simple flat rate pension is nothing of the sort, and is so full of complexities hardly anyone understands it. It is completely stupid and adjust to create the cliff edge whereby you retire one day and get the old pension and next day the new one. And from my own perspective, probably like many other people who took the opt-out option, what I did opt out of was the SERPS top up, not the actual State Pension. Yet it appears that the arbitrary value of this opt out will now be deducted from the new flat rate pesnion.

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Michael Stevens

Jan 18, 2016 at 20:34

Very fair for the equal of state pension age. Women want equal rights with men.

Now they will have it at last, but they complain.

When the state pension was introduced the retirement age was 70.

We must increase the age from 66 to 70 by 2040.

I paid 47 years N.I. for the same benefit as one with 30/35. This should be increased to 40 by 2022

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Margaret deans

Jan 18, 2016 at 20:59

When I had paid 35 I was advised no need to pay more contributions, maybe you were badly advised ifvyou paid 47 .

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Law Man

Jan 18, 2016 at 21:38

Margaret: you cannot avoid paying NICs if you are under state retirement age and work. Work from 18 to 65 and you have to pay NICs for 47 years.

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Jan 19, 2016 at 08:18

When I retire in 2017 I will have worked for 47 years.

40 years full NICs

7 years contracted out

I won't get the full pension

Another person retiring at the same time has

35 years full NICs

0 years contracted out

He gets the full pension

I paid in full NICs for 5 years more than him and still get less state pension

It's the unfairness of this calculation that is difficult to justify. I know I will get some contribution from the 7 years contracted out but then I worked for 12 years longer.

The discount from the full pension fails to take account of any NIC contributions after the 35 years qualifying BUT counts every single contracted out year as a discount. That is manifestly unfair.

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Chris Culy30

Jan 19, 2016 at 09:15

I am a Pensions Transfer Specialist (IFA) and have been following this topic for some time. I have copied below some of my learning material dated July 2013 on the subject, which covers the Transitional Arrangements. It seems to me that the writer of this article has not managed to convey the full story.

I believe the issue lies in the title Single Tier State Pension, when in fact it is anything but that.

In April 2016, every working-age individual’s accrued pension entitlement (including entitlement to the BSP, GRP, SERPS and S2P) will be combined to form their ‘current scheme valuation’. This will only include entitlement accruing from the individual’s own contributions – that is, derived or inherited rights will not be taken into account. This ‘current scheme valuation’ will be compared with the individual’s ‘single-tier valuation’, or the amount of single-tier pension entitlement that they would have accrued if they had spent their working life up to 2016 under the single-tier system instead.31 Entitlement as of 2016 will be the higher of these two valuations, and will form the individual’s ‘foundation amount’.

Those who have contracted out in the past will face a ‘contracted-out deduction’ to their valuations under the current and proposed systems, to account for the fact that they will have built up entitlement in a private pension scheme.

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Seasoned cynic

Jan 19, 2016 at 09:51

FBOG you're spot on. It is not fair and it's not meant to be!

That's because collectively, we have to shoulder the burden for those that cannot pay 'enough' by way of NI to cover the cost of their pensions.

However, I do agree that the SERPS issue is extremely unfair and the way the DWP weasels it's way out of actually telling anyone what the impact on their pensions will be is totally unacceptable. When I do get to SPA in 2027, I could have been paying NI for over 49 years (I'm hoping to retire a bit before that IF my DB pensions are enough).

Twice I've applied for pension forecasts and am none the wiser as to what my eventual State Pension will be as they make some watery comments to the effect that I need to find out about the effect of SERPS! Quite how I'm supposed to do that when they have the information is beyond me.

If the DWP pensions department was investigated by the FSA like a Life Office, I'm sure they would find serious incompetence and bad practice is rife.

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Ian Hazell

Jan 19, 2016 at 10:56

Is there a new mis-selling case here against the Financial Advisors who advised us to opt out? It goes on and on.... and only the lawyers are benefiting. I can just see the new wave of cold calling starting up.

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Dave Hill

Jan 19, 2016 at 12:37

The sole objective is not to simplify the pension, but to make it cheaper for the government. They can change the rules anytime they want. I have never trusted the government, and that's one reason I contracted out for a number of years, so I would get a full state pension, and my contracted out part of my pension went into a private pension.

Serps is an extra to the basic pension, so under the current system the basic pension is not reduced, you've earned extra to your state pension. On this new system, how can they reduce your basic pension, if you've contracted out, or have I misunderstood what is due to happen. I'm glad I've just retired, as I get £180 per week state pension which includes the second pension (SERPS), plus my income drawdown, for the years when I contracted out. With the new system I probably would get a very low, if any, state pension. If you've paid basic national insurance for the required number of years you should of right get a full state pension.

The basic state pension is not a benefit, I've contributed to it.

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Gareth Harries

Jan 21, 2016 at 01:25

Yep Dave Hill I think you have missed the point.

For lots of people they do not qualify fully for SERPS/S2P as they were contracted out either through their Final salary scheme or they opted to do so as they did not trust the government or the figures looked too goo not to do so with their Personal Pension etc.. As the new calculations for the the new "flat rate pension" take into account the number of years and the timings that you were out of these schemes, it has become very opaque as to whether you are receiving fair value on you "flat pension" minus deductions for the years out etc..

Good luck to you for getting the pension you have from the government! But some of us are arguing that we are not getting a fair deal and the government irrespective of which party will not come clean on this.

As to whether it is a benefit or not, the rules need to be Clear, consistent, transparent and fair, which they do not appear to seem so.

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Rosemary B

Jan 23, 2016 at 11:01

I am with Pat Strong on this. Women like me born in 1955 and who contracted out of Serps in a private scheme are compelled to take the equivalent Guaranteed Minimum Pension (earned prior to 1988) from their scheme at age 60, but this is now frozen. Neither the private scheme nor the State schemes will apply increments to it. On top of that, our state pension age has moved twice, now standing at 66, so we have been hit with a doubly whammy!

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geoffrey mulford

Jan 24, 2016 at 05:36

On the whole I support the governments changes. I think the new system in the end will be fairer and more transparent. It's the transition from the old to the new system which is the problem.

SERPS opt out should never have been brought in. Can't imagine people were marching in London demanding SERPS opt out. Probably a city fat cat looked at the pension money with his greedy eyes and bribed corrupt politician to bring it in.

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Pat Strong

Jan 24, 2016 at 06:25

I agree with you Geoffrey, I generally agree with the reforms. Just let people know in good time, make transitional arrangements, don't take away accrued pension rights, don't rush things through without thorough investigation and impact assessments or lie to cover up when 'mistakes' are made.

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Jan 24, 2016 at 12:30

Frances Coppola,

Why do you and most journalists say that the full state pension of of 115.95 is going up to £155.65. The full state pension if you include state second pension it is over £190 for a low earner and £220 pw.

You should say that in the future it is slowly reducing each year from the figures I have mentioned to £155.65 pw

Most people reaching state pension age in the first year will receive exactly the same as they would under the existing system other than some self employed and carers.

As you can see from these figures people who are contracted in will in future see a big drop in their state pension. Read a report done by the institute of Fiscal Studies " A Single-Tier Pension: What Does It Really Mean? "

It is only going up from basic state pension of £115.95 for people who have been self employed all their working life. Even then many of the self employed would have spent some of their life being employed and would have accrued some extra state second pension.

For women and carers they have been receiving credits towards state second pension since 2002. Women will now receive credits for state pension if the were carers before 2002. Even these women must have spent some time being employeed before and after being carers so would have been accumulating state pension for those years so I doubt if many of them will gain much from this change in legislation.

The article should be pointing out that people who are contracted in will start to receive less pension in future than under the existing system. A drop of about £2,000 pa for a low earner of about £10,000 and £3,000 pa for a high earner.

You mention " The new qualifying period is thus more generous than pre-2007 arrangements. Not completely true as there was never a minimum number of years for state second pension which could be more than the value of lost basic state pension.

If you compare the existing system against the new state pension you will see that the existing system is more generous for most people.

Existing No minimum NI 30 years for full pension

New Minimum of 10 years 35 years for full pension

Existing Inheritance rights.

New loss of inheritance rights

Existing Derived rights worth over £60 pw for married women without NI record.

New No derived rights

Existing GMP increases up to about £20,000

New no GMP increases

Existing If contracted in to state second pension possible to have a pension of between £190 to £214 pw based on IFS figures when they did their report in July 2013

New max of £155,65 pw

Existing Contracted in accumulate extra state pension all their working life.

New Contracted in cease accumulating state pension after 35 Years

Contracted out occupational Pension in private sector likely to see a reduction in future accrual to their pension. Loss of NI rebate.

May be able to accumulate some state pension if still paying NI. Not possible to receive extra state pension and paying NI if reaching state pension age before 6 April 2017.

Public sector no reduction in occupational pension due to 35 year rule. May be able to accumulate extra pension as in private sector. Loss of NI rebate.

Existing.If contracted out receive 1.4% NI rebate

New lose NI rebate of 1.4%

The main gainers in the new scheme are likely to be people who are contracted out people who may be able to earn extra state pension if their contracted out pension and state pensions come to more than the new state pension greater than £155.65 . This should not have been allowed as they and their employers had receive NI rebates of 1.4% and 3.4% respectively.

For people who are contracted in who have a total state pension greater than £155.65 where they and their employer did not receive NI rebates can't build up any extra state pension.

Existing system people can defer state pension at a rate of 10.4% and take some as a lump sum.

New defer at 5.8% without the option to take a lump some.

Existing triple lock on up£115.95 pw basic state pension only

New Triple lock up to £155.65 pw

When Steve Webb brought forward the start date of New State Pension from April 2017 to April 2016 I wonder how many people actually gained. .

I have many friends who have been contracted out who reach state pension age prior to 6 April 2017 who wish it was left at 6 April 2017 due to their loss of GMP increase and inherited and derived rights.

The main problem about the introduction of the new state pension is that the DWP don't want to write to people to tell them about the changes where in the past they would have written to people to tell them about the changes.

They wrote to women and men even if a bit late to tell them about changes to state pension age.

Due to lack of information about changes about things in the new state pension that make people worse off everyone should put in a claim for compensation for not being given any advance warning.

The Government are repeating the error of what went wrong with inherited SERPS from 100% to 50%. which was announced about 14 years before it was due to start in 2000 and the DWP forgot to mention it in their booklets..

Because of the lack of information the Government put off the start date for just over two years, did not let it affect people over state pension age and had a sliding scale reduction over a further 8 years which expire in 2010.

So as yo can see it is possible to get the Government to change their minds if you all lobby your MPs and write to Frank field at the Work and Pensions Committee and also the Public Accounts Committee who should be worried about compensation that may have to be paid.. They had to pay out compensation to some people in the inherited SERPS fiasco.

In this change many more people will be able to put in a claim for compensation. I think over 10 million people could put in a claim

You should all read about what went wrong about the inheritance of SERPS due to start in 2000 without much warning.

Read Improving Service Quality: Action in Response to the Inherited SERPS Problem "by the National Audit Office.

It was promised by Mr Darling the pensions Minister at the time that in future the Government would give plenty of advance warning about changes to state pension that make people worse off.

I think this change to the New State Pension could be the biggest case of maladministration ever due to not keeping people informed about the changes that make them worse off.

None of this affects me as I have been on state pension for over 10 years.

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Rosemary B

Jan 24, 2016 at 12:56

Thank-you, Kenneth, for your summary. I think I have discovered most of these differences over the last few months, but the facts are not easily obtainable and good to see collected together, without smoke and mirrors!

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Jan 24, 2016 at 13:00

Kenneth - you have set out in detail where there are likely to be real losers from this change, not just those who are disappointed they are not suddenly going to get an increase in pension they had not paid for.

The catch is that the transitional arrangements will still need to be operating for many years to avoid major losses, and this can be altered at any time by new Regulations. As I indicated above the contracted out deductions under the new scheme mean that anyone with a few years of such contributions will see a significant reduction in their entitlement under the new scheme.

In my case with 33/44 years in contracted out schemes, my state pension would be reduced to £8.17 a week (yes that's right I would lose virtually all my entitlement to any state pension) - a far greater reduction than can be accounted for by the relatively small reduction in NI contributions. While I was not expecting to get the new uplift, I am uncomfortable that my entitlement to most of the state pension I will get will hang for the rest of my life on the transitional arrangements still being operated!

But of course the real issue lurking behind all of this is that even with the current levels of immigration the ratio of workers paying NI to pensioners will continue to fall, making further adverse changes inevitable. Continuation of the "triple lock" will only bring this date forward.

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Jan 24, 2016 at 15:47

horshamtim Thanks for coming back,

When I did my last posting and mentioned that the new state pension has triple lock up to £155.65 pw I should have mentioned the Government can't be trusted as it could have been taken away at any time by the Government especially as they are now taking away increases on a persons GMP where increases are normally paid with the state pension and were supposed to be guaranteed . That is why it was called it a GMP. A person was not supposed to be worse of than if they had remained in the state pension and were never contracted out.

Even though they are being overgenerous in allowing people who have been self employed to make up the difference between the maximum basic state pension up to £155 65 pw it is highly possible that the chancellor could make them pay higher NI in future.

When Steve Webb was at the Work and Pensions Inquiry about the new state pension he mentioned that he was told by the Treasury he could do what he liked with the new state pension as long as it cost less than the existing state pension,. so it must be he and his advisors that came up with the new state pension. No one else can be blamed.

He should not have taken away accrued rights to subsidise the self employed and allowed the people who had been contracted out to build up extra state pension for the years they had been contracted out as this was not a cause that should have benefited I think it is only the carers that should have benefited.

The reason Steve Webb gave for allowing some of their pension was that he wanted everyone to receive a full state pension as soon as possible.

To me this was not a good reason to disadvantage millions of people so some could gain especially the self employed and people currently working and in a contracted out pension scheme.

In my opinion he purposely did it to help people in contracted out schemes earn extra state pension when if including contracted out pension they had a pension greater than £155.65 pw. For these people they should have only done it if their contracted out pension including the new state pension came to less than £155.65 pw.

I think it was done to keep the public service unions quiet. They are noticeable by their absence in being vocal about the losses I have mentioned in the new state pension. As it happens there are about five and a half million people left in contracted out schemes of which about three quarters are public service employees.

To pay for the generous treatment of self employed and people in current contracted out schemes they have taken away accrued benefits and future accrual for people who are contracted in and people with less than 10 years NI.

As it happens I know that the Treasury and DWP are in correspondence about public service schemes having to be paid by their scheme if the GMP increase is not paid by DWP with their state pension.

I was told the Treasury and the DWP realised that the legislation about new state pension would not pay GMP increases. They did not bother to tell us the public. This is all being done secretly.

As you mention that your state pension was reduced your pension under the new state pension to £8.17 pw I think this calculation was only done so people in contracted out schemes who are still working can receive extra state pension

I think they should have shown it like as follows just using figures from the current system.

To keep it simple assume contracted out and 35 years of NI.

Basic state pension £119.95

State second pension £10.00

Contracted out pension £90.00

Total £219.95

Someone with same work record and salary contracted in.

Basic state pension £119.95

State second pension £100.00

Total £ 219.95

If someone had less service and total pensions less than £155.65 for either category then they should have it explained to them that they could build up extra state pension until the reach what ever the new state pension is at the time.

For someone with 35 years NI it is ridiculous that their pension entitlement under the new state pension can be below the basic state pension as in your example.

As I have said before this was only done to benefit people who are in a contracted out scheme at the 6 April 2016 and are still in the contracted out pension scheme.

As I am on state pension and was affected by the inheritance SERPS scandal I decided to keep a watch on DWP booklets to see how they were being altered with change of legislation so have copies of several different publications going back to 1999.

The most useful is A Guide to State Pensions NP 46 dated 2004. There was a 2005 printed edition that they took off the web. The last edition on the web is 2008 which was never printed.

Just after the 2008 edition was available on the web

I was glancing through it and noticed that comparing the 2008 edition with 2005 edition it had been reduced by about 30 pages. When comparing the two I noticed that they had removed all reference about GMP increases ind inheritance rights. I then started writing to DWP about August 2008 asking why the information had been removed . I was told that they were considering putting it back in the next edition.

Conveniently they have never produced another edition of NP 46.

Under freedom of information requests I tried to find out why the information was removed and who authorised its removal .

They refused point blank to tell me why they had removed it. I can now see why. They hoped no one would miss the information about GMP increases and inherited SERPS when they introduced the new state pension.

Most of the changes under the new state pension are being done by stealth.

Any changes that are being done should be done fairly and not give someone extra benefit at the expense of others losing benefit.

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Dennis .

Jan 24, 2016 at 18:33

Ever since I started work in 1972 the pension rules have been constantly changing. What makes anyone think that the new system will be the end of change?

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Graham Barlow

Jan 27, 2016 at 10:59

Looking back over the years we made some good decisions. When the Serps opt out was brought in by Major , we looked into SERPS and found that you could get all those benefits for about a third of the cost from the commercial market price.. There was no contest, we instructed our advisors to opt in the whole scheme. All the Pensioners have enjoyed the top serps, index linked ever since, and the only battle we have had was over the widow's inherited rights. We won that battle and got it reinstated by Darling who didn't have any option after a 3 year battle.. On a personal note I paid extra insurance in 1956, and as a result have been receiving an increment for that as well ever since I retired. index linked. The index linking is the killer in all state paid pensions. SERPS in its original form required financing on a professional basis to survive. The state could not have sustained it out of Tax without massive Tax increases.

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Jan 27, 2016 at 11:22

Graham Barlow

Glad you remember the battle about inherited SERPS. It could be about to start again as the Government are now taking away the remaining 50% inheritance without telling people about it . If you remember Mr Darling promised at the time future Governments would never introduce changes to state pension that make people worse off without giving plenty of advance warning and that any information they gave would be accurate and complete.

They are failing on all counts with the introduction of the New State Pension as they are not writing to anyone to mention changes. and are giving as a reason the data protection act.

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Seasoned cynic

Jan 27, 2016 at 11:53

I think the main point here is we contracted out of the 'State Earnings Related Pension' and continued to pay NI towards other benefits including the 'Basic State Pension' which will no longer exist once the (inappropriately titled) 'Flat rate pension' is introduced.

It is scandalous and we need someone with both influence and commitment to spearhead a proper campaign. Martin Lewis perhaps?

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Jan 27, 2016 at 12:14

Seasoned cynic.

If you are affected by the changes you should read about the problems with inherited SERPS being reduced from 100% to 50% without much advance warning.

Some people managed to put in a claim for compensation becaus of not being given enough advance warning. Everyone should be able to put in a claim if the reach state pension age on and after 6 April 2016 as the Government at the moment have no intention of telling them about the changes.

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Pat Strong

Jan 27, 2016 at 12:15

Have written several times to martin lewis, no response. In contact with the national audit office, who are fantastic and investigating. Have contributed 3 times to the work and pensions committee public inquiry, the latest contribution accepted and will be published shortly. I have written to my M.P about both issues and have complained to the DWP and these have been escalated to the independent case examiner, which If unsuccessful, I will progress to the pensions ombudsman. I have also written to the leader of the House of Lords, (response back fro DWP!!!!) etc, etc

Everyone needs to act for justice to be done. There are others, far more experienced and knowledgable than me working on this, but it is not enough.

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Graham Barlow

Jan 27, 2016 at 14:24

I must say that thr battle over the full widow's inheritance rights on SERPS was not a pleasant experience. The Politicians ducked and dived and tried to fob us off, with inadequate compensation for what we had bought and paid for with our private pension funds, when we opted in. The tenacity came from finding out that nobody in the Dept. of the DWP had even been told of the changes legislated for the year 2000, If it had been say the private Insce Co.s who had mis sold the SERPS policy, you would have never heard the last of it from the Parliamentary hypocrites.

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Graham Barlow

Jan 29, 2016 at 09:34

I think it is important not to compare this GMP battle with the Widows' inherited rights under the SERPS scheme. The difference was we bought and paid for a contract. We contracted in, and all the terms and conditions were in writing. The bit that was omitted was the cut in the widows' benefits from 100% to 50%. This action by the Govt was ruled by the Parliamentary Ombudsman as "Gross Parliamentary maladministration" They , the Govt, had broken the legal written contract.

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Jan 29, 2016 at 10:00

Graham Barlow,

I think you do have to compare GMP battle with Inherited rights as when contracting out started people were told that the responsibility of paying GMPs was with the occupational pension scheme and that any increases would be paid via the state pension.

The taking away of GMP increases is being done without any warning, so it is exactly the same as what happened to inherited SERPS when it was being reduced from 100% to 50% in 2000. and is now going to happen again without any warning to the remaining inheritance of SERPS.

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Pat Strong

Jan 29, 2016 at 10:05

100% agree with Kenneth. Can see no difference whatsoever. A pension promise broken in both cases. No notice or warning in both cases. Cover up bigger in SERPS last time round, bigger in GMP indexation withdrawal this time round.

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Linda S.

Jan 30, 2016 at 22:55

My GMP is approx 83% of my deferred private pension uthat will not now be index linked (all pre 1988) as part of my state pension. It is scandalous that the government has not highlighted this and without adequate time for us to prepare alternative financial savings. The inquiry going on is a joke as no member of the other understands this complex issue. My new state pension forecast (SPA 2020 Nov) is £122 per week. it will take me approx 8 years plus to reach the new flat rate of £155 not the couple if years that Pension minister said it would. Anyway I plan yo retire next year as I have already made plans to retire that cannot be changed. I intend writing to as many people as possible. This can't be allowed to happen. It's immoral!!!!

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Linda S.

Jan 30, 2016 at 22:55

My GMP is approx 83% of my deferred private pension uthat will not now be index linked (all pre 1988) as part of my state pension. It is scandalous that the government has not highlighted this and without adequate time for us to prepare alternative financial savings. The inquiry going on is a joke as no member of the other understands this complex issue. My new state pension forecast (SPA 2020 Nov) is £122 per week. it will take me approx 8 years plus to reach the new flat rate of £155 not the couple if years that Pension minister said it would. Anyway I plan yo retire next year as I have already made plans to retire that cannot be changed. I intend writing to as many people as possible. This can't be allowed to happen. It's immoral!!!!

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Graham Barlow

Feb 01, 2016 at 12:42

If this is what the original legislative change says, and everybody who opted out was informed that was the case, and was part of the opting out contract then I cannot see how they can get away with it.. They do have lawyers on their side, and will look for chinks in the armour. The trouble is a great deal of Pension decisions were taken against incorrect actuarial advice has made mince meat of the original cost forecasts.The original SERPS would have bankrupted the country the stats were so ill foundedThe longevity of the population has changed the costs out of all recognition.

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Feb 01, 2016 at 14:20

Graham Barlow

I agree that the original SERPS was far too generous. The Government did change the accrual rate but as far as I can remember it did not affect accrued benefits.

I don't know if you realise that under the current state pension system a spouse/ partner can also inherit some of a persons notional SERPS even if the person who died was not entitled to any SERPS them selves. Not many people realise this as it is not mentioned in the current addition of NP 46 it even though an earlier addition does.

Have a look at " a guide to state Pensions" dated April 2004. page 79 "a guide toStatePensions"

At the moment the Government are getting away with it because not many people are complaining but because I and a few friends complained to the Public Accounts Committee and received replies from Margaret Hodge the Chair of the Committee she asked the National Audit Office (NAO) to investigate why the DWP are not telling people about loss of GMP increases and other loss of benefits such as inheritance of SERPS.

The NAO are just about to do a report about lack of information about GMP increases ceasing and in a few mnths another report on all the other bits of information that the DWP are not telling people about,

I don't know if you are aware that people can inherit notional SERPS. Have a look at "a guide to State . Pensions NP 46 and the following on page 79,

You will be entitled to half of any Guaranteed Minimum Pension

(GMP) that your late husband had derived from his membership of a

contracted-out salary related (COSR) scheme from 6 April 1978 to

5 April 1997. This will be added to your own GMP(s) earned from

6 April 1978 to 5 April 1997 and the total deducted from the

combined additional State Pension earned during that period which

would have been paid if neither of you had been contracted out.

You will also get half of any GMP increments he was entitled to, but"

The DWP deleted the information about GMP increases and inheritance of GMPs and notional additional pension from the 2008 addition of NP 46..

So you will see it is not only people who have been contracted in who will lose inheritance of SERPS it will also affect millions of people who have been contracted out of SERPS.

Inherited GMPs will also lose their GMP increases,

Most of the changes under the new state pension are taking away accrued rights without any warning.

If you are affected by any of this you should put in a claim for compensation on the grounds that the DWP are not telling you about them.

Have a read about the blunders the Government made with the change of inherited SERPS in 2000. Several reports done by the NAO and various committees.

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colin overton

Feb 02, 2016 at 10:00

In the past the old system was a disgrace. Women retired 5 years before men and lived longer. Alot of men either didn't live long enough to get a pension at all or enjoyed it for only a few years, while women picked up a pension for 10 or 15 years. Then the rules began to change and gradually there was more equality. It's interesting to recall the inequality across the EU. In France, until relatively recently people starting work at 15 could retire on a full pension at 55. The retirement age in France is still well below that in the UK and this in a country that the UK subsidizes. I don't think anyone should trust any government over pensions, neither should anyone voluntarily have there pension with the company they work for.

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Seasoned cynic

Feb 02, 2016 at 10:32

Colin Overton.

Ref Equality - I'm pretty sure it won't be long before the life expectancy of working women and working men levels off. Many women work full time, have long commutes, stressful jobs and still do all the household chores as well as looking after elderly relatives; effectively working 80 to 90 hours a week.

Ref workplace pension.

If your employer offers to contribute to a workplace pension and you don't join you are losing out on part of your pay.

In some cases that may only be 2.5% which even when you match with your own 2.5%, will amount to very little even if you manage to stay with them for most of your working life.

However, some pay 6% which is not trivial. Match that yourself and at 12% you're beginning to get something worthwhile.

The downside of 'workplace' schemes where the employer does not pay is that contributions are often paid to the provider a month or so after they've been deducted from your pay. If that's the type of scheme you're referring to then unless they've negotiated significantly lower charges which might negate the investment delay, I agree that you're better off going it alone.

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Linda S.

Feb 02, 2016 at 21:53

I have been watching the New State Pension enquiry chaired by Frank Field. I do not feel all the members understand GMPs. I cannot see hoed the government can stop the increases as they have not informed us. The pensions minister said she expects pension providers will probably pay the index linking if not now paid as part of your state pension. I cannot see this happen ending!!!!

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Nigel c

Feb 08, 2016 at 17:03

I have just received my estimated state pension as i am 65 in September ,I have been contracted out since i was 23 and have 48 qualifying years,they have estimated i will get £118.13 a week which is less than the old state pension would be after April 2016 £119.00, as the new pension kicks in April £151.95 and they have estimatd mine at £118.13 so minus £33.82,not good after working all these years but over the page under important information it states,

If your COPE "Contracted out pension equivalent"amount increases the state pension you get could be lower than the estimate we have give you, they have estimated my scope and it is £63.00 pounds a week less than they estimated so how much more will they reduce my state pension, do you think this is correct would like to hear from anyone who can assist. thanks Nigel.

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Feb 13, 2016 at 10:52

Linda S.

The pensions minister said she expects pension providers will probably pay the index linking if not now paid as part of your state pension.

I think you will find out that when she made this remark she was referring to public service schemes.

I doubt if many private sector schemes will do this especially as they are losing their 3.4% NI rebate and will most probably be reducing the accrual rate under the scheme or putting up the contribution rate to the members.

The public sector are not allowed to change their schemes because of employer loss of 3.4% NI rebate.

There are special arrangements inforce under the existing system where if there is a reason for the GMP not to be paid with the state pension HMRC write to the public service scheme to tell them to take over the payment of GMP increases normally paid with state pension.

This is done mainly when a person moves to a country like Canada where the GMP increases is not paid by the state.

I have correspondence with the Treasury under freedom of information about if public service schemes will have to pay the GMP increases for people reaching state pension age on and after 6 April under the new state pension.

They realised their was a problem three years ago but did not bother to tell Parliament that they were thinking of making special arrangements for public service schemes so that they would not be affected by loss of GMP increases normally paid with state pension..

They refuse to tell me if this is going to happen or not as they say it is still under discussion. If the public service schemes do take over the payment it will be done by secondary legislation in secret.

In my oppinion they don't want to give out information about GMP increases being taken over by public service schemes as they realis that once it becomes public knowledge it will be very awkward for the Government to explain why there are special rules for public service employees so that they are not affected by loss of GMP increases paid with the state pension.

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