A. 60% won’t get the full £155-a-week new flat-rate state pension they initially expected

When it announced its new policy in 2014, the Government said that anyone who had a full National Insurance record would be guaranteed to get the new higher deal. But a Money Mail investigation proved this wouldn’t be the case. Under the old scheme, higher earners could add to their pension by accruing benefits during their working life in a top-up scheme, called the State Second Pension (previously known as SERPS),which could boost the weekly payout by an extra £165 a week. Historically, workers in final-salary schemes didn’t claim the State Second Pension because their company pension was so generous. This process was known as contracting out. In return for taking this burden off the state, employees and employers were allowed to pay a reduced amount of NI contributions — most recently for workers, 10.4% instead of 12%. Now, under the new flat-rate pension, anyone who paid this lower rate will have a deduction made for the years they were contracted out. A hideously complicated equation will be made which involves calculating a ‘Foundation’ amount of pension someone could claim, and then deducting contracted-out years from this sum. Essentially, it could mean someone who worked for 35 years, but spent 20 years at a company that had a final-salary scheme, being left with just 15 years of qualifying National Insurance contributions for the new pension. How much this would reduce the full £155-a week pension is not yet clear. It will be a devastating blow for all those led to believe they would get £155 a week. Many workers also might not realise they were contracted out because this was often done automatically by employers.

In theory, the new pension is supposed to make it much easier for everyone to understand. But because of the complicated calculations over what they can claim, it is almost impossible for ordinary workers to understand what they will get. The official figures from the Department for Work and Pensions show just how many will miss out. In 2016, just 42% of pensioners would have got the full £155-a-week payout. This figure rises to 52% in 2018 and 73% in 2026. However, this still means that a decade after the new state pension was introduced more than one in four retired people will be claiming less than the full amount. In a bid to end the confusion, the DWP is to give everyone the chance to have a personalised pension statement. They will be able to get this online or over the phone. The DWP says that — except for very rare cases — even when people aren’t able to claim £155 a week, they will still be getting a bigger pension than they would have been entitled to under the old system. Personalised pension statements will eventually be available to all workers but those retiring in the first five years are being given priority.