Following a Which? investigation into state pension forecasts it’s clear to us that the Department for Work and Pensions still has improvements to make.
I’m a fair way off qualifying for the state pension, but I was curious to see an estimate.
I’d say that the information in the paper and online statements I received was broadly useful. However, there were some key omissions.
State pension forecast
First, although they cover your National Insurance (NI) record to some degree, what this means and what you can do to plug any gaps is largely absent.
Secondly, your contracting-out record must be used to work out your state pension and ‘Contracted Out Pension Equivalent’ (COPE) estimates. (Before 2012, you could contract-out, or choose not to make contributions to a second, top-up pension, provided by the government.)
COPE is an estimated figure used to give you a rough idea of what you’re likely to get from other pensions, if you’ve opted out of the additional state pension. But the workings aren’t shared, and there’s no way of checking the DWP’s (Department for Work and Pensions) sums.
HM Revenue & Customs (HMRC) says that if you want to know whether you were contracted out, you should contact your pension scheme provider or employer. But this could take a great deal of time and effort, particularly if you’ve had several employers and some no longer exist.
Overall, this system isn’t all that clear and the confusion could lead people to question the accuracy of DWP’s calculations.
We think people need detailed contracting-out information to help them understand their state pension entitlement.The DWP should include this information on both your paper and online statements – and soon.
Working out your state pension
In fact, we think there’s still much more that could be done to improve pension forecasts.
In a separate piece of research we carried out earlier this year, we found that over a third of people approaching retirement age find it difficult to keep track of their pension pots. So we were pleased to see the Treasury back our call for a ‘Pensions Dashboard’ to be delivered by the industry by 2019, this will house all the information necessary to help savers make informed decisions about their retirement choices.
If you want to find out what your state pension forecast is there are a number of ways you can do so. HMRC provides an online service, it takes about 10 minutes and you’ll need to confirm your identity and provide your NI number.
Or if you’re over state pension age or reach it in less than 30 days, you can get a paper statement from the Pension Service. And if you’re retirement date is further off then you can contact the Future Pension Centre.
Have you seen your state pension forecast? Did you find your forecast confusing at all?
This investigation originally appeared in the September 2016 edition of Which? Money.