The problem with cans of worms is that the cans degrade and in the end the worms get out, and cause a stink.
Over the weekend, the Telegraph that acts as a professional “worm can opener” has been turning its attention again to the issues that are about to emerge from the “cessation” of contracting-out -(of course something as complicated as “contracting-out” of SERPS/S2P cannot come to an end- that would be too simple – it must “cessate”).
But put in straight language, Katie Morley is right, “Four Million People Retiring from this April could get the wrong state pension”. HMRC cannot possibly believe the statement published this morning in FT Adviser.
“no pensioners will lose out” due to faulty data supplied by their employers pension schemes.”
There is neither mechanism nor resource to make good this promise. The data in the private sector is problematic, the HMRC is making occupational pension schemes a hostage to fortune.
The statement pierces a particularly smelly can of worms!
Will we be able to COPE?
If you are over 55, you can apply to Government (press this link) for a COPE. A COPE is a statement of what you would have got by way of state pension, if you hadn’t chosen to join a company (or personal) pension scheme which paid this part of your entitlement for you.
We are invited , as Jim Bullen would have put it, to “look at what we would have won”. This may or may not be equivalent to what we can buy from our “appropriate personal pension” or get from our occupational pension scheme.
The Government hope that it will be and say so in their information document (p13) “Your State Pension Explained”.
Most people will find, when the State Pension paid by Government is added to the COPE amount (paid as part of their workplace or personal pension(s)), this will be more than the full amount of the new State Pension (currently £151.25 a week)
This is not quite as strong as the HMRC statement, but still seems more based on hope than evidence!
Case study;- me
I am 54 and have 9 months to wait till I can get a COPE.
I very much doubt I will ever be able to work out what I was entitled to (for myself). The COPE may help but I expect I’ll conclude that some years I took good decisions- other years bad.
I would be extremely surprised that my appropriate personal pension, which carries quite high charges and has hardly grown since I last contributed to it in 1990, can provide me with as much as the SERPS entitlement I “would have had” from 1992 to 1995.
My entitlements to GMP are different for my earnings between 1995 and 1997 and 1997 and 2005 and I spent a year in Jersey in 2006. From 2007 till 2015 I’ve been contracted in to S2P (I hope) and of course everything changes in April.
My case study is fairly typical. I had self-employed earnings, worked outside the UK, worked in a company that contracted me out and had times in contracted in employment. Some of the time when I could have been contracted in- I chose to contract out. It’s as bad as those stupid tea towels about cricket.
If you are a foreigner, you take it on trust that cricket is being played by the rules (however complicated). What you don’t want to hear is that the game’s result has been affected by match-fixing.
I fear that the conspiracy theorists are at work as I write, opening cans of worms with the hope of finding evidence that our state pension entitlements under COPE are wrong, or that they are greater than what we get from our contracted-out pensions or that there is systemic unfairness for large swathes of the population.
What is almost certain to happen is that people will be able to point to almost every stage of the change process and find fault with the communication of that change. This is like pushing at an open door (of the worm-canning factory). Since nobody read the Government documents when they were written, it can easily be proved that the Government failed to communicate. That is a premise of the WASPI campaign and it can be applied to just about everything written by the DWP on the subject since 1978.
“from now on things will be different”.
I have made a new friend over the weekend, he has sent me a letter written to him by Margaret Hodge earlier last year , in reply to his enquiry about the impact of the 2016 changes. It contains this statement
My new friend also sends me a statement made by Alistair Darling at the time when the Government were having to re-communicate changes in entitlement to “inherited SERPS” (a subject for another blog).
The giving of wrong information by a Department is inexcusable. There is a clear responsibility to ensure that the information that Departments provide is accurate and complete. In this case, it was not. Furthermore, even the serious implications of giving the wrong information were not appreciated by the Department. That should never have happened. The previous Government should have sorted the matter out years ago.
Let canned worms lie?
My friend tells me that the National Audit Offices confident statement (above) may have been a bit glib and that it is soon to publish another report stating that there will be losers (as well as winners) from the cessation of contracting out. Of course there will be. There is no way that books can balance unless there are.
The questions are
- Are the losers a persecuted minority (as some women of the WASPI campaign are claiming they are)
- Was the Government wilfully negligent in communication
- Are we being systemically ripped off by the financial services companies with whom our money was invested.
I am quite sure that the Telegraph will find good reasons to answer all three questions “yes” and that the Government will be able to argue “that was then and this is now”.
We have, in the meantime, to cultivate our garden, get on with communicating the new state pension, get on with communicating the pension freedoms (and the mantraps that surround them) and get on with staging 1.8 m employers and a further 5m employers.
I hope that we will be providing a more transparent approach to things going forward, but – having just re-read this blog- I am not so sure!