Pensions: about as easy to understand as the theory of relativity. Successive governments have pledged to simplify and clarify the UK pensions system. Each one has failed. If anything, the financial ins and outs of our retirement have become ever more complex.
Now the powers that be have made changes to the state pension. If, as is likely, the new rules pass people by, many risk missing out altogether.
So, what's happening? In a nutshell, ministers have increased the number of years of national insurance contributions needed to qualify for a full state pension. From April this year, individuals are required to have 35 years of national insurance payments under their belts, five years more than the previous system. Those with less than ten years of contributions will receive no state pension at all.
It's all part of what the Government says is a replacement for a 'mindblowingly complicated' existing regime. Ha! While that's an apt description for the labyrinth-like situation we have at the moment, the new system is hardly an improvement.
In fact, research from Aegon UK shows that people are in the dark about the impact of lost national insurance (never mind the fact that national insurance contributions increased back in Spring for six million workers - their costs rose by 1.4 per cent, which translates into a deduction from their pay of up to £37 a month).
According to Aegon, 80 per cent of the UK population don’t know the number of years they need to make national insurance contributions for to qualify for the full £155.65 a week state pension, and the majority (57 per cent) underestimate the number of qualifying years needed.
Furthermore, one in three people are completely unaware that taking long career breaks could mean they won't be eligible for the full state pension. The Aegon study of 4,000 people found that some 15 per cent have taken time off work for maternity or paternity leave, 15 per cent to bring up children, 14 per cent have been away from work due to redundancy or forced unemployment, while another 14 per cent have had to take sustained periods off due to medical reasons.
The Government isn't sitting on its hands, however, It has announced plans to communicate with 100,000 people at risk of completely missing out on the new state pension. In a one-off move, the Department for Work and Pension has agreed to write to those due to retire in the next decade but who have not met the minimum requirement for a state pension, urging them to make more contributions.
But officials balked at recommendations made by the Work and Pensions Committee, such as setting up a dedicated phone number to answer questions about the state pension, leading to criticisms that a letter will be ineffective on its own.
Kate Smith, head of pensions at Aegon UK, said: 'The fact that 80 per cent of people don’t understand the potential implications of career breaks on their state pension just highlights the sheer scale of the task ahead to properly educate people about the new state pension. We already know that millions of people simply don’t know how much they are set to receive, and these new statistics should ring alarm bells.
'While it is encouraging that the Government is taking steps to rectify this unawareness, they really have just taken the first step on a long journey. To ensure no one loses out, every individual in the UK should be contacted and provided with an estimate of the state pension they are on target to receive – this will start to clear the widespread confusion and prevent people getting a nasty shock when they do reach state retirement age. This approach will not only force people to engage with their pension more often, it may also prompt them to review their private provision and in doing so, take stock on whether they are on course for the retirement they aspire to.'
The new state pension was launched to replace the more convoluted two-tiered system. Only five months into the regime and the promised new era of simplicity looks set to fail.
Helen Nugent is Online Money Editor of The Spectator