/ Money

Do you understand your state pension forecast?

Pension pot savings

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‚Äôt¬†shared, and there‚Äôs¬†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‚Äôt 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 ‚Äď 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 ‚ÄėPensions Dashboard‚Äô¬†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.

Bill says:
27 August 2016

The DWP pension predictions are rubbish. I asked for an estmate and they told me the basic, ¬£118 at the time. When it arrived it was ¬£134 a week because I’d chipped into several other “schemes” during my working life. The new scheme is even more riddled with ifs buts and maybe’s.

Lilia says:
27 August 2016

Not really, it is complex and looks like I will get very little!

Morag says:
27 August 2016

Mine said I’d be getting ¬£131 per week, because they were taking ¬£5.35 a week off what I would have been getting (¬£151ish) if I hadn’t opted out. I don’t understand that.

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Morag says:
28 August 2016

I worked out if I live 20 years after state pension age, I’d be getting around ¬£5 per week from the private pension, pretty much what they say they’ve taken off. I just don’t know where the other ¬£15 or so has gone.

I hear about the problems people face, but can I balance this with the accurate and helpful information my wife and I have received from the DWP over the past 3 years. Perhaps we were lucky, perhaps its not all doom and gloom.

I’ve set up my online account at HMRC but the details are nonsense. I’ve called them a couple of times and all I get is, ” please call us back in 6 months when we should be able to tell you what to expect”. The online account says I have 42 full years of NI contributions. However, it also says my pension will be ¬£22 less than the maximum amount which is shown as ¬£152. I’m currently 59 years old and won’t get the pension until I’m 66.

I think it is disgusting that the maximum is £152 per week when you have paid in for 42 years, how can someone live off that.

Absolutely agree that there should be more transparency about contracting-out. It is a disgrace that we cannot accurately check the calculations upon which the DWP bases our pension!

Absolute chaos. Contracted in or contracted out, years of unemployment, taxing dividends on pensions, stopping the transferable marriage allowance, not on benefits and no money, part time, feeling abandoned and ageism. We have all been let down by Labour and Conservative Parties who pay their own MP’s astronomical pensions after failing the electorate.

The DWP data was surprisingly accurate BUT the biggest scam has been the recent ” standardisation” of the pensions as of April 2016 – to the detrement / loss of those who had to take their pensions earlier.
SERPS was a poorly administered scummy system that not every company allowed you to be part of nor did the Government pay into it without repeated chasing. So you can have paid in 40+ years under the old system and get less than those having done ca 35 years under the new. The socalled pension top ups under the old system are means tested so those that saved are penalised compared to those under the new who can have any investments and still get the full pension , not needing a pension top up.
Please correct me if I am wrong but my perception is thet the whole system favored those that did not save and more recently those who migh or might not have saved – why was there no phase in but an absolute cut off date?? Is it fair that should be winners and losers for those who have paid in a full wack all their working lives??

In the early years of the ‘new’ state pension the majority of people will get a pension based on the old calculation as it will be higher than the new one due to the potentially massive reductions on the new scheme due to contracting out in works pensions.

The online forecast and written forecast are completely different. Some consistency would be nice for such an important issue.

When questioning DWP the estimates are not clear about contracted out. They do not clearly state that they have taken that into account for me. So I know what my providers estimate and the current pot – now falling for the first time in 40 years and can see that current annuity levels are hopeless. Even with a pot that I am told is 5 times the “average” it is a quarter of getting enough to cover basic bills.

My husband and I worked very hard all through our working life. We both retired at the age of 60. We are unable to even go out for a meal and are in debt and cannot make ends meet. Where is the justice in this?

Ruth says:
27 August 2016

I started receiving my State Pension last November, and was surprised to have quite a large deduction made for when I was contracted out of SERPS. (The earlier forecasts I had received made no mention of this deduction, and based my forecast purely on my NI contribution years.) I have no idea how they calculated the “equivalent” value of company pension I would receive to then deduct this amount from my State Pension, nor have I any idea how to question this, although it’s probably too late now! Confusingly, there were other add-ons (in my favour!) which, again, I wasn’t aware of either! What a minefield!

Gareth Vaughan says:
27 August 2016

It’s completely hopeless. One cannot get an accurate forecast.

I lose £30 per week because I was born 6 months early Рthe system is criminal.

I am waiting for a forecast of my pension at the moment.I don’t actually get it until I am 66 which I think is
terrible.They said in my forecast under the old scheme I would get a full pension,I hope this still stands under the new scheme. Have to wait and see after reading some of these comments.

What about us foreigners? I paid into the UK system for 26 years, what will happen after the Brexit?? I am German but living in Scotland since 1989.

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That’s an interesting point. It would be helpful to know – for the purposes of understanding the exit negotiations in due course – how many UK citizens living in the EU have been paying into the pension schemes of the states where they are domiciled and have built up an entitlement to retirement pensions and other benefits which could be at risk when the UK leaves unless there are good reciprocal arrangements. This is one of the essential factors that has been glossed over [or ignored, even] so far. All the attention has been on retired ex-pats who are in receipt of UK pensions and could choose to return with no loss of income.

chris says:
27 August 2016

What about all the final salarry schemes which went bust because Gordon Brown and the labour government raided the surpluses in them forcing thousands into pension poverty Why has SO LITTLE been DONE or SAID about that they’v all kept that quiet!!!

Gordon Brown abolished the Tax relief on the dividends received by the scheme; nothing to do with surpluses. Many schemes with surpluses simply took a pension contribution holiday and spent the money elsewhere or increased the dividends to their shareholders.

I have received a state pension for some 15 years but I have never been able to calculate whether or not it is correct and have just had to rely on DWP statements. Thank goodness I have a private pension but even there they have arbitrarily changed the initially agreed annual rate of increase. Even a small annuity based on modest part-time earnings has been whittled away. How much more will be chipped away over the few years remaining to me?

Lived at the same address for over thirty years. Failed online verification checks!

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The Governement identification scheme – contracted out as it is has been – is a pretty massive failure.

There is a blogger DMossEsq has been writing on Govt Digital Initiatives for some time. And this from his posting 27/8.

“GDS have become the thoughtless exponents of process. The fact that GOV.UK Verify (RIP) is a hopeless failure doesn’t matter. Success isn’t the point. The point is to follow the process.

“Here‚Äôs what GOV.UK Verify looked like in December 2012, before usability testing started”, GDS tell us: Moss shows an early screenshot with six companies ready to identify you

Cassidian have pulled out of GOV.UK Verify (RIP). So have Verizon. So have Mydex and Ingeus. And PayPal (not shown), they’ve pulled out twice. GOV.UK Verify (RIP) is being trounced by the venerable Government Gateway system ‚Äď given the choice, that’s what people in their millions use to interact with on-line government services, the Government Gateway, and not GOV.UK Verify (RIP).

And meanwhile, there’s GDS iterating away in an intellectual pissing match, doing “contextual research in users‚Äô homes and job centres”. They’ve become more like Whitehall than Whitehall.

One final question for you. Would you now give GDS £450 million?


Updated 11:24

GDS’s exclusive commitment to agile means that it is left with pathetically few methods to tackle the manifold diversity of the problems thrown up by the real world.

The US are said to have copied GDS when they set up USDS, “building a more awesome government through technology”. Well things are moving on. ‚ÄúThe tyranny of agile‚ÄĚ, says Jennifer Pahlka in a not bad article, The Tyranny of Agile (hat tip: John Alty). “Never thought you‚Äôd hear me say that, did you?”, she says, and she’s right.

So the US has spotted the problem. So has local government in the UK, please see Socitm briefing warns over digital transformation ‚Äúdelusions‚ÄĚ.

But GDS? Are they still hung up on agile? Kevin Cunnington, their new director general, is quoted in Bryan Glick’s all-important 31 July 2016 Computer Weekly article as saying “we need to build services in an agile and collaborative way”. Do we?

Mr Cunnington may want to put a little distance between himself and that unworldly safe space of agile when he finally addresses the public in his new GDS r√īle. “

Well, first prize for gobbledygook if nothing else. I’ve read this three times and remain baffled! Maybe that’s the intention

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I see.

Well, I shan’t let it ruin my Sunday.

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It is worth remembering that profit-making businesses provide the taxes directly an indirectly, provide the goods, provide the employment that allows governments to fund services and public expenditure (including a financial hash in so doing with ill-conceived PFIs.)

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They generate tax, whether through the wages and salaries they pay by providing employment – NI, income tax – and those that most companies pay directly. It is not tax evasion, but tax avoidance – not paying taxes legally, just like individuals don’t pay tax on ISAs, for example. To tighten up on tax avoidance requires the tax rules to be changed, and that will require international action.

Would you pay tax that your were not legally required to?

Actually the posting was about the problems people are suffering with this Verify system forced onto us by the Government and farmed out to a variety of commercial companies. My wife has spent a frustrating week as the HMRC site refuses to recognise her despite having used it successfully on-line for at least two years.

I am not offering a solution but MrMoss has been on the case for at least three years. The “agile” system appears to be a fad on how to opearte which is severely flawed. All quite above most of us but yet incredibly important to how our society will function . When I consider the elderly and the infirm wrestling with these systems on poorly protected electronic devices I shudder to think where will end up.

What organisations are looking to the future representing the consumers who by no fault of their own are incapable of using the internet successfully?

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” McEvoy revealed the government successfully verified 800,000 identities in August, and claimed 77.5 per cent of the people using the service are satisfied with it.
However, there are still improvements to be made, she said, including improving the completion rate, which currently stands at 36 per cent, and making the feedback process better too.”

I am always impressed by a success rate of 36%.

Due to ill health – never claimed a penny I worked 27 years and they say I am due to get ¬£116.00 next year, that’s not even the basic pension I think they make it up as they go along.