"We urge the Government to go much further and write directly to every individual to provide them with an estimate of what state pension they are on target to receive."
In a report, the Work and Pensions Committee recommended that "as a matter of urgency" the Department write to people it projects will reach pension age with fewer than 10 qualifying years, lower State Pensions than they would have derived from a spouse’s contributions under the existing system, or gaps in their contribution record.
The Committee said: "These letters should clearly explain the person’s circumstances and set out both projected entitlements and means of improving them. Though some letters will go astray, the benefits of this approach exceed any risks.
"We further recommend the Department work with pension providers to write similarly to individuals who built up a guaranteed minimum pension during the period 1978 to 1988."
The WPC also calls for the introduction of a new State Pension telephone hotline service for the recipients of these letters. The service, it says, should enable claimants to discuss with an expert a strategy for increasing their State Pension entitlement, and could be provided by an existing pensions guidance service.
Aegon says it welcomes the Government’s decision, but calls for it to go further and send everyone a personalised projection.
Steven Cameron, Pensions Director at Aegon, said: “We warmly welcome the Government having agreed to write individually to the estimated 100,000 individuals who don’t have sufficient NI contributions to qualify for the new state pension. It is vital that this group understands this as early as possible rather than facing a shock at state pension age. Some may be able to take steps to improve their retirement prospects either through paying extra voluntary NI contributions or by contributing to a workplace or private pension.
“But this is just a first step and we urge the Government to go much further and write directly to every individual to provide them with an estimate of what state pension they are on target to receive. This should then be updated periodically. Our research shows that millions of individuals have no clear understanding of how much or how little they may receive as a state pension. While people can now request a projection, the majority will not think of doing so. Sending out individual personalised state pension forecasts would mean individuals could look at these alongside their private pension forecasts, take stock of whether they are doing enough for the retirement they aspire to, and if not take early action.”
