On receiving a recent press release bearing the heading ‘22 years of pension savings gone in 24 hours’ my first thought was that they were talking about the impact of the introduction of the single-tier pension on contracted-in people like me.
The press release in fact referred to The Pensions Regulator’s very laudable anti-fraud campaign highlighting the ease with which scammers can cause decades of savings to disappear very quickly.
The experience served to remind me of how uncertain state pension can actually be, and why pension savers would be unwise to base their retirement planning
on it existing in the format calculated today when they come to receive it decades from now.
Had the pensions dashboard existed 10 years ago it would have told me I was on course to receive a combined basic and secondary pension of around £225 a week in today’s money, if I were to carry on working to a typical retirement age. But under the new single-tier pension I and millions more contracted-in losers will be capped at £169, and yes, the cost of replacing that £56 a week lost index-linked pension will wipe out pretty much the entirety of my two decades of DC saving.
The point here in relation to the dashboard is that it does rather put the Government in something of a straitjacket when it comes to future pensions reform. It might seem that the current deal is here to stay, but years from now who is to say that a future government may take a different approach? How much will this year’s 3.9 per cent uplift under the triple lock, reflective of earnings growth, sharpen political minds about a rethink? And would they have been able to do something quite so drastic as the single-tier pension, creating so many winners and losers,
if they had been leading people to expect they were going to get something else?
Of course any pension comes with its uncertainties, but getting the Government to say how much income you are going to get 30 years from now is a big ask.
For millions state pension will be the bedrock of their retirement income, and it is fairly safe to say that politically, cutting these people out completely, will be unacceptable. So we can all expect to get some state pension.
But the actual numbers are guaranteed to be wrong. That’s why the dashboard project should press ahead without waiting for the state pension to be included.