The new state pension, which came into effect on 6 April 2016, replaces the previous dual-tier system and its associated means-tested elements with a new, single-tier state pension.

Recently, I was explaining to a client how the various state pension elements interact with contracting out and the benefits provided to members.

This reminded me how bewilderingly complex the current system is, and bringing this to an end must surely be welcome. However, changes can’t be made overnight and moving to the new system means complications for a while yet.

The transition also creates ‘winners’ and ‘losers’, and the impact assessment published by the DWP sets out various factors leading to better or worse outcomes.

These are not easy to understand. However, analysis carried out by the PPI concludes that three-quarters of people in their twenties and two-thirds in their thirties are expected to be notionally worse off from these changes.

One particular concern is the impact on those with GMPs. Schemes pay limited increases on GMPs, and the state tops up the basic state pension so that, overall, the GMP increases in line with CPI inflation.

From April 2016, this will no longer be the case, which seems difficult to justify from a member’s perspective.

Simplification is much needed and it’s accepted this will mean winners and losers, but one suspects that buried within the intricacies, there will be rather more losers than winners in the long term.

SPP council member Steve Hitchiner

Share Story: