We now have our new flat-rate or single-tier state pension up and running, available for all those reaching state pension age from 6 April. But just how good is this new pension going to be? According to the Institute for Fiscal Studies, there is a “considerable risk of disillusionment” likely to creep in as people start claiming pension incomes this year and do not get what they might have been expecting.
It is estimated more than six out of 10 people retiring over the next four years will get less than the full flat rate of £155.65 a week the Government has been trumpeting.
In the main, this is because of the deductions that have to be made from the assessed starting amount of the new pension as at April 2016 for past periods of contracting out when they had paid reduced National Insurance contributions or had received rebates paid into a private pension instead.
But this may not be quite as bad as it sounds. The deductions will certainly bite for those retiring over the next few years but for those with a slightly longer timeframe they will normally be clawed back and made good by the acquisition of additional NI qualifying years from continuing in work and making further NI contributions in the period up to their state pension age.
It seems to me the bigger issue is the effect of the new state pension policy as a whole over the much longer term.
Not only will future generations of pensioners have to wait longer before being able to draw their pensions but, for many, the amount they will receive will be a lot less, if only they realised it, from a capped flat-rate pension than they would have received under the existing two-tier system.
In fact, according to latest estimates, three-quarters of those now in their 20s will be worse off and will lose an average of £19,000 over the course of their retirement.
I have seen very little in the way of publicity from the Government itself about this aspect of the new pension or indeed about other groups likely to lose rather than gain from it. It has largely been left to the media and other independent commentators such as the Pension Policy Institute to point all this out.
The message that must go out loud and clear to younger people is this: if you want to retire at an age that suits you and have an income that gives you the standard of living you might aspire to have in your later years, then you must start saving privately yourself as soon as you can and not rely on the state to do it for you.
In light of their experience with the Waspi women, the Government should accept it has a responsibility to be transparent and come clean as to the full impact of retirement strategy on individuals, now and in the future, both bad and good.
Getting the policy right is the first priority but making sure all those affected know about it is surely a close second.
Malcolm McLean is senior consultant Barnett Waddingham