The DWP has this week issued a fact sheet purporting to show how the transitional arrangements for introducing the new state pension will apply from next April taking into account earlier periods where the worker had been contracted-out of the state earnings related pension scheme (SERPS) and the state second pension (S2P).
Commenting on the fact sheet Barnett Waddingham senior consultant Malcolm McLean says:
“The fact sheet illustrates the mind-blowing complexity of the arrangements being put in place for taking into account periods spent contracted-out of SERPS/S2P in establishing entitlement to the new single-tier state pension starting in April 2016."
“Although it will be barely intelligible to the vast majority of those affected it does confirm the difficulty the DWP has faced in giving effect to past accrued rights and rebates under the old system and configuring them into the new one."
“It also gives the lie to the claims made originally by ministers that the new system would produce a more generous simpler flat rate state pension for millions of new pensioners going forward – none of these claims would appear to be true at least in the short term. Indeed as the fact sheet shows it will probably be up two decades before a majority of new claimants with a past history of contracting-out will actually start to receive an unabated flat rate pension."
“I can’t help feeling that the transition could have been better handled in a different way. Although it would undoubtedly have cost more in the short term, an arrangement whereby past entitlements to SERPS/S2P were bought-out by the payment of a cash lump sum (to a maximum capped as necessary) and periods spent contracting-out discounted altogether would have been much simpler and probably fairer to all concerned. It would also have meant that subject to the national insurance criteria being met, new pensioners would all be receiving a genuinely simple flat rate state pension, the administration of which would be similarly simple and more intelligible to all concerned. Sadly at this stage it looks unlikely that this will be now be possible.”
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