17th December 2013 by The Harried House Hunter
If the Government changes pension policy for the ‘greater good’ and it is bad news for a smaller group of people then surely it is duty bound to at least explain the harsh facts to them.
The opposite appears to be happening. It is likely that the segment of the population who decided to remain contracted in to the state second pension/and or SERPs will lose out compared with their peers who decided to contract out.
But the statistics have not been made available to make for easy comparison between the groups.
This excellent story in trade website Corporate Adviser (aimed at pension consultants and financial advisers who advise employers) suggests that the Department for Work and Pensions has decided not to make data available on gross state pension to the Office for National Statistics covering those who will lose out.
The key paragraph from Corporate Adviser is below.
“The figures for mean gross state pensions, which give the clearest official picture of the level of combined basic and secondary pension of contracted in workers, have been omitted from the ONS’s 2013 Pension Trends paper because the DWP chose not to give it the figures upon which to base its statistics. The DWP blamed the omission on an ‘increased workload’.”
Individuals will still know their entitlement but without knowledge of where they sit in relation to others they will struggle to argue about whether the change is unfair or not.
There are meant to be a few important rules of public policy reform. It is usually thought important to consider who will lose out from a policy, whether there is anything that can be done to mitigate the impact and to try and be straight about what is happening if a decision is made to go ahead.
This clearly isn’t happening in this case and the excuse about ‘increased workload’ would be risible, if it wasn’t such an important issue.
Beware received wisdom
The fact that staying contracted in will probably leave individuals worse off turns on its head the received wisdom of around a decade ago, when some pension companies worried that contracting out was the wrong choice and were actually contracting people back in unless they said otherwise. It goes to show just how dangerous received wisdom can be when it comes to your finances.
This reform may not be the wrong approach in a broad sense. At some stage the whole system required simplifying and maybe flattening. But that is cold comfort if it looks as if you will lose out permanently on your pension entitlement especially if you believed you were building entitlement during your working life.
Certainly pretending it isn’t happening is very poor practice. Voters should always have a choice. They can’t make a proper choice if they aren’t informed.
Of course the change also risks offending another principle certainly when it comes to pensions. People should be given enough time to adjust to the new reality perhaps by saving and investing more. In this instance, they clearly do not have enough notice.
Therefore, at Mindful Money, we don’t think there is much you can do much about this change except of course write to your MP suggesting you have been treated unfairly. A big post bag and back bench dissent can sometimes change things. And ironically, it may make your case even stronger, if you can point to the fact that a government department has held back some of the information ‘due to overwork’ with the handy bonus that it can’t be debated properly.
It is probably not what the DWP expected – with its Sir Humphrey-on-an-off-day approach – but it makes us wonder whether this argument is really over just yet.