DWP reveals new measures to help simplify pensions and more of this week’s finance news

DWP reveals new measures to help simplify pensions and more of this week’s finance news

 · 11 min read
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This week, the Department of Work and Pensions revealed new measures as it aims to simplify pensions. Elsewhere, we learned about the impact that falling victim to a scam has on victims’ wellbeing, that the rise in living costs is slowing down, and that pensioners believe they’re paying for the pandemic.

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The Department of Work and Pensions has revealed new measures that will be introduced to simplify pensions. This includes the introduction of simplified annual pensions statements and a new online dashboard for pensions. It is hoped that simplifying pensions in this way will make it easier for Brits to deal with their retirement funds.

The new two-page pension benefit statements will be launched in October next year for those with defined contribution pensions schemes. The statements will be user-friendly and should make it easier for people to understand what is happening with their pensions savings.

Providing a range of information

The new annual statements will provide a range of valuable information for those with these pension schemes. This includes showing how much money is in the pension plan, how much has been saved in the current statement year, and how much money the person should have by the time they retire. It will even include information on what can be done to boost income in retirement.

Discussions on how pensions statements could be changed for the better have been ongoing since 2019. The aim was to make them easier to understand, more user-friendly, shorten them, and make them more consistent.

Minister for Pensions and Financial Inclusion Guy Opperman MP said: “With more people saving for their retirement - thanks to the tremendous success of Automatic Enrolment - it’s vital that they can also clearly understand how their pensions work. This marks a new era of accessible statements for savers, empowering people to plan for the retirement they want.”

He added that the new statements would make it easier for people to engage with their pensions and provide them with a far better understanding of their retirement finances. 

Scams costing a fortune in terms of wellbeing

Over recent years, there have been a lot of reports relating to the financial losses suffered by victims of various financial scams across the UK. This has become even more of an issue over the past 18 months, with the global pandemic resulting in a sharp increase in scams and victims.

However, a recent report from Which? has also looked at the financial cost of the impact on victims' health and wellbeing rather than just the actual money lost to scammers. According to Which?, the cost per victim based on their wellbeing after being scammed can be calculated at over £2,500 a year.

A range of ill-effects

Those who have fallen victim to the various financial scams have reported a wide range of ill effects resulting from this. Some of these include heightened stress levels, severe anxiety, and general ill-health. 

The report from Which? claims that while the financial losses of being scammed work out to an average of £600 per person, the cost to wellbeing is much higher.

To come up with the calculations, the consumer group took on consultants to carry out data assessments, the results of which were then applied to a Treasury-backed approach to assessing social impacts. This then enabled experts to look at changes in wellbeing in financial terms.

According to data from the report, those who fall victim to scams end up experiencing a drop in overall life quality and satisfaction, an increase in anxiety and stress, and a drop in happiness levels. It was also found that people reported being worse off in terms of their general health.

Following the release of the data, Rocio Concha, director of policy and advocacy at Which?, said: "This brings home the scale of the emotional and psychological harm that victims suffer when they are defrauded. The government must not ignore the huge impact an epidemic of fraud is having on our society."

September sees slowdown in living cost rises

Official figures have been released showing that there was a slowdown in cost of living rises in September. As the economy continues to reopen following the chaos of the last 18 months, prices fell slightly, which resulted in the increase in living costs dipping in September compared to the previous month.

The figures for September show that the increase in the cost of living measured by the Consumer Prices Index (CPI) dropped to 3.1%, compared to 3.2% for August. The most significant impact on price increases came from higher transportation costs. Drops in living costs were fuelled by falling prices in hospitality, with prices in restaurants and other eateries rising less this summer than in 2020.  

Bank of England set to take action

The figures were released not long after the Bank of England said that it would have to take action soon in relation to rising inflation. There have been suggestions that this could include increasing interest rates.

Suren Thiru, head of economics at the British Chambers of Commerce, said that over the coming months, prices could increase further "with the increase in the energy price cap, partial reversal of the VAT reductions for hospitality and tourism and persistent supply chain disruption".

He also expressed concern the UK's economic recovery could be hampered by rising inflation, as it would squeeze the profit margins of businesses and put further financial strain on consumers’ household budgets, affecting their spending power.

Business Secretary Kwasi Kwarteng has recently also expressed concern over price rises, stating that the government wanted inflation rates to be lower. He indicated that price increases could result from an increase in demand seen during the reopening of the economy.

He said, "When you see quite strong economic growth, there is always the danger you will have inflation. Now the critical question is, how long is that inflation going to last for?"

Fears that Chancellor could target tax-free pensions cash in the Budget

Experts believe that the Chancellor may target tax-free pension cash as part of his next Budget to try and raise more money. The Treasury has a lot of money to try and recoup following the financial chaos caused by the pandemic. Some fear that tax-free cash benefits could be among the areas the government is considering targeting to raise this money.

Tax-free cash is considered one of the critical benefits of pension saving and is designed to encourage people to save and plan toward financial security for their retirement. Officials have warned that if the Chancellor does decide to try and claw money back by targeting tax-free pensions cash, it could cause huge controversy and prove to be highly unpopular.

Treasury desperate to claw back cash

After the financial devastation of the past 18 months, the Treasury is desperate to find ways to claw back some of the enormous sums of money that have been paid out. This includes measures such as higher taxes, and there is now speculation that it could include the reining in of pensions benefits.

Tom Selby, head of retirement policy at AJ Bell, said rumours were doing the rounds regarding the Treasury removing or restricting the ability of savers to take 25% of their retirement savings tax-free.

Selby said, “While the Treasury has seriously explored radical tax relief reform, it is telling that tax-free cash has never been looked at in the same way.”

He added, “This is likely in part because any move to cap or abolish tax-free cash altogether would be extremely unpopular, and in part, because it would almost certainly involve creating a protection regime, so pension contributions already made continue to benefit from their existing tax-free cash entitlement. This would deliver an unwelcome double for the Chancellor of unpopularity and complexity. What’s more, any savings to the Exchequer would potentially take years to materialise.”

Many pensioners fear they are paying for the pandemic

According to campaigners, many pensioners feel as though they are paying the price for the Covid pandemic. This comes after the suspension of the triple-lock system. Without the suspension, pensioners would have been in line to receive an increase of over 8%. In addition, it comes after the CPI figure for the triple lock was revealed earlier this week, which suggests that the government has saved close to £5bn per year with the suspension.

It was revealed that pensioners will see their state pension income increase by 3.1% next year, which is far lower than what they would have received under the triple lock system. The Director of Silver Voices, Dennis Reed, said that the level of the increase had come as a big disappointment, as it means that pensioners will miss out on a hefty increase.

The triple lock system was suspended temporarily because the level of earnings growth was unusually high due to the pandemic. This has left many pensioners feeling they are paying the price for the pandemic.

Rishi Sunak is set to reveal his Autumn Budget later this month, and Mr Reed said he is urging him to review and reinstate the triple lock system. He said, “I would urge the Chancellor, who has got a chance next week at his spending review, to review the decision to scrap the triple lock.”

He also said that the extra amount of money that pensioners would get with a 3.1% increase would not be adequate, particularly considering soaring living costs. He added, “It’s way below the level that is required. In a way, seven to nine pounds a week has been stolen from pensioners by this decision to scrap the triple lock that is vital to maintain the existing standard of living.”

Charity claims ten years’ notice necessary for state pension age rises

Charity officials from Age UK have said that people need to be given at least ten years' notice of state pension age increases. Age UK director Caroline Abrahams said it becomes impossible for people to make informed decisions about their retirement without being given such notice.

The state pension age is currently 66 and scheduled to increase to 67 and then 68 over the coming years. In addition, the Organisation for Economic Co-Operation and Development (OECD) has said that governments need to delay retirement by two years each time life expectancy increases by three years, which it states could be hugely beneficial to the economy and could increase living standards in years to come.

Raising a variety of concerns

The report from the OECD has raised a variety of concerns among charity officials, including inequalities in life expectancy and the lack of support for those who struggle to work until retirement age due to ill health.

Caroline Abrahams, said, “Rises in state pension age have already hit many people hard and state pension age is due to begin to go up to 67 in the next few years. At Age UK we believe people need at least 10 years notice of any change because it’s such an important factor in the decisions we all make about how long to keep working and when and how to scale down our hours to fit in other things, including helping with the care of grandchildren or older relatives.”

Another official, Louise Ansari, Director of Communications and Influencing at the Centre for Ageing Better, said that extending the number of years people worked could benefit many in terms of their finances, mental wellbeing, and ability to stay connected. However, she pointed out that life expectancy increases had stopped over recent years and even gone into reverse for some.

Reno Charlton
Reno Charlton
Reno joined Age Group in 2020 and has nearly 20 years of writing experience. Although she specialises in writing about finance topics and covering finance news, Reno is also a published author and has written several children's books and short stories.
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