The news earlier this month that the state pension amounts for as many as 200,000 women have been wrongly calculated and underpaid, in some cases for over a decade, was a shock.
The sums of money involved are substantial and may equate to as much as £13,500 in payments to people.
Those payments will now need to be both quantified in each case and reimbursed, and there are apparently hundreds of civil servants now working frantically to do just that as a manual process.
Quite apart from anything else, this must surely be a wake-up call to any of us who care about the problems bound to occur when a system gets to become as bewilderingly complex as we have allowed both our state and private pension systems to become.
That substantial mistakes can be made in calculating the state pension entitlements for so many people, and that neither those who calculated them nor those who were in receipt of them had any idea the mistake had been made for over a decade, speaks volumes.
It seems unbelievable that we have a pension system so complex and labyrinthine that such a thing could have occurred. But we clearly have.
A system so complex is of no use to anybody, whether that be today’s pensioners, today’s workforce or today’s public servants who have to administer it.
I would imagine that if any of us took the time to question thousands of ordinary people we would find very few among them, if any, who could properly describe the way the state pension is calculated. Indeed, I would guess few would have any idea even of their own state retirement age, let alone how much pension they are likely to receive from the state when they finally get there.
The same is probably true, though, with company pension schemes.
How many people in the imagined thousands we could interview would have even a vague idea of the value of their occupational pension holdings, particularly if they have changed jobs a few times? Not many, I’ll bet.
While nobody would find that at all surprising, we should all find it to be worrying.
If people by and large have no idea of what they can expect in pension payments from the state and their various terms of employment, how on earth can they possibly make sensible plans for their retirements? They are left simply hoping for the best while fearing the worst.
Of course, those lucky enough to be advised by professional financial advisers will be able to understand their pension entitlements and options, but very few people in the general population can actually afford financial advice.
There is much discussion these days about the so-called advice gap. I think that is a misnomer. It is an advice chasm. Most have no access to advice and nor are they ever likely to if things carry on as they are.
None of us should be happy with that.
Steve Bee is director of WorkLife by OpenMoney
Execellant i agree whole heartedly,,,,
Excellent article, Steve – I wish the right people would read it and take action (but I’m not holding my breath!).
Greater clarity and a simplified system would benefit everyone – I’m not saying it would easy but it should be possible, surely?
Steve is 100% right.
The fault is the politicians of
of both parties holding power who never know much about pensions and make ” seat of their pants” decisions usually ignoring the professionals.In their ignorance they have completely screwed up state, occupational and private pension provision.
Nor is the industry’s labrythine regulatory system.