So, we now have our new flat-rate or single-tier state pension in place and up and running, available for all those reaching state pension age from 6 April this year.
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 don’t get what they might have been expecting to receive.
"Not only will future generations of pensioners have to wait longer before being able to draw their pensions but for many of them the amount they will receive will be a lot less."
The impact of 'contracting-out'
It is estimated that more than six out of ten people retiring over the next four years will get less than the full flat-rate of £155.65 a week that the government has been trumpeting – in the main 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 others with a slightly longer time-frame the deductions to their state pension will normally be clawed back and made good by the acquisition of additional national insurance qualifying years from continuing in work and making further national insurance contributions in the period up to their state pension age.
The bigger issue, it seems to me, is the effect of the new state pension policy as a whole over the much longer term.
Waiting longer and receiving less
Not only will future generations of pensioners have to wait longer before being able to draw their pensions but for many of them 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 twenties 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 who are 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.
Start saving now!
The message surely that must go out loud and clear to younger people is this. If you want to retire from work 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 the light of their experience with the Women Against State Pension Inequality (WASPI), the government should accept they have a responsibility to be transparent and come clean as to the full impact of their 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.
This article originally appeared in Money Marketing