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John Greenwood: The DWP and the case of the missing pensions statistics

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The Department for Work and Pensions has prevented the Office for National Statistics from reporting figures that highlight contracted-in pensions losers.

The figures – from the latest ONS Pension Trends paper – would have shown that the average contracted-in male currently gets about £26 a week more than the level of the single-tier pension. Over a contracted-out worker’s retirement, that works out at very near the extra £24,000 state pension the chancellor told the typical public sector worker to expect in return for £6,000 extra National Insurance.

The disparity in outcomes between contracted-in and contracted-out workers is probably the most politically contentious issue of the Government’s laudable but flawed single-tier pension policy. So the DWP’s decision to block the ONS from crunching numbers that show what a contracted-in worker would have received under the current system raises questions.

The ONS has published mean figures for the combined state pension over the past 10 years. For the average man, it is around £145 in 2013 – very close to the level of the single-tier pension, so one might ask what all the fuss is about. 

Anyone who knows about pensions will understand that while the average is £145, the average for those who have been contracted-in all their lives is being brought down by those who are contracted-out, including 5 million public sector workers.

What the contracted-in millions will get is not published, which is a shame because they are the people for whom auto-enrolment and single tier are being introduced. 

These figures were included in the 2011 edition of Pension Trends. The DWP grossed up the equivalents that private schemes paid on behalf of the state, which got us nearer the figure that truly reflected the combined state pension. In February 2011, contracted-in males were retiring on £164 against a net average of £132. With the single-tier £144 figure reflecting its 2012/13 level, it seems safe to assume that contracted in males would have now been retiring on at least £170. So the average working male is set to retire on about £26 a week less as a result of this ‘simpler’ pension. 

Contracted-out workers, though, will be at or near the basic state pension level yet will be allowed to accrue full state pension at £4.11 a week for each year of contributions.

The DWP says it dropped this part of the report because of the increased workload of the current pension bill. But I think the Government just does not want to highlight the unfairness of its reforms.

John Greenwood is editor of Corporate Adviser

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