3Improving communication
Phases of the DWP campaign
General awareness and statements on demand
49.Steve Webb told us that his initial priority in communicating the new state pension was to set up a system of personalised statements on demand. This, he said, was necessary because of the complexity of the changes:
People are so diverse and have such different histories in the State Pension system that you cannot get a general message across. So my priority was personal statements.”107
State pension statements are available to people aged 55 and over. The Department issued around 500,000 such statements between their introduction in September 2014 and October 2015.108
50.The timetable set by the Government left less than two years from the passing of the Pensions Act 2014, which created the new state pension, until the introduction of the reforms in April 2016. This was a revised timetable: our predecessor Committee noted in its 2013 examination of the draft legislation that the implementation date was brought forward from “from April 2017 at the earliest […] very late in the scrutiny process”.109 The change ensured that women born in the year from 6 April 1953, who had been subject to two increases in their state pension age, would be included in the new state pension.110 We heard that the Department faced challenges in getting the statement service up and running:
a lot of effort was put in to setting up the statement service post Royal Assent, and initially capacity was stretched because the process was semi-manual.111
51.Witnesses criticised the quality of the DWP’s communication campaign. Hymans Robertson said the Department was over-reliant on people on requesting a statement:
As many will be working under the false assumption that they will get £155 per week there is a real risk they won’t seek out this additional information in the first place.112
We consider the case for automated statements later in this chapter. Hargreaves Lansdown, a pensions provider, told us that DWP communications had been insufficiently focused on clarifying complex changes:
No attempt has been made to address or communicate policy anomalies or to grapple with the challenging issue of contracted-out benefits.113
Explaining complexities
52.Richard Caseby, DWP Director of Communications, told us that while the last Government had sought to promote general awareness of the new state pension, the current Government had focused on increasing understanding of specific aspects of the reforms. As noted in the last chapter, the Minister has placed a particular emphasis on the effect of past contracting out.114 She explained the challenges in doing this:
It is much harder to undo impressions that have been wrongly gained initially than to get the impressions right in the first place. There has been a reluctance to engage with the issue of contracting out because it is so difficult. That reluctance has been on a number of sides, but we are tackling that now.115
53.The Department told us the campaign had introduced “a full range of communications tools”, including a new Ministerial blog (see Figure 2), animations on PensionTube (Figure 3), fact sheets, infographics, case studies and advertisements across multiple media. Stakeholder groups were being used to promote awareness of the changes in groups that may be detrimentally affected by the changes, such as people with low numbers of qualifying years.116 A “pensions personality quiz” created by the DWP and Silver Surfers, a website for the over-50s, was promoted to 275,000 Facebook followers, with 2,500 users in one month. The Department encourages stakeholders to share content over social media more generally.117 There may be lessons, in terms of effectiveness and costs, from innovative Government awareness campaigns, such as that used by the Department for Business, Innovation and Skills to promote shared parental leave.118
Figure 2. Ministerial Blog
Figure 3. PensionTube animation on contracting out
54.Age UK described the DWP’s campaign materials as “generally well written and presented” but called for “more detailed information for some specific groups” and information targeted at those providing advice on the reforms.119 Mercer, a company that provides pensions advice and administration services to businesses, said that while the campaign was likely to raise awareness that reform was happening, it was less suited to explaining the individual implications. The PensionTube video on contracting out was better at explaining differences in pre-April 2016 circumstances than their implications for new state pension levels or the options available for people to improve their pension.120 There were widespread calls for greater personalisation of communications.121
Online statements
55.The Department told us that a forthcoming digital statement service would enable individuals to see their starting amounts, a forecast of future entitlement and state pension age online. If they wish they will also be able to view their full national insurance record and information on how to increase their state pension.122 The Minister said this would be a “revolution in the way people can look at their statement” and do “all the things we would want that the current system cannot do”.123 The new system is currently being publicly tested and the Minister said she hoped it would be generally available for the start of the new state pension in April 2016. An extract from an online statement on the testing website is shown in Figure 4.
Figure 4: Extract from online state pension statement
56.Alan Higham said that the provision of state pension calculations online was a “crucial step” as “private pension schemes would have no real excuse not to be able to present a combined view of private pension and state pension”.124 Which? said that in order to plan effectively for retirement people needed to be able to see “all their pensions and savings in one place” and called on the Government to “lead and coordinate the development of a comprehensive pension and savings dashboard”.125 Yvonne Braun, Director of Long Term Savings Policy at the Association of British Insurers, told us she favoured joint ownership of the dashboard between industry and government, a model that had worked well in Sweden.126
57.Our July 2015 Report on Pension freedom advice and guidance concluded that a pensions dashboard was “long overdue” and recommended the Government “announce a clear timetable” for its introduction.127 The Government responded:
If the industry identifies legislative and regulatory barriers preventing firms from innovating in this area, then the government will consider whether these can be overcome. However, […] it is important that any dashboard is industry led; there is no benefit in the government imposing a solution on industry that is not fit for purpose.128
58.Steve Webb called for a more active role from government in establishing the dashboard:
The one thing I was disappointed about was when it was said that Government would just stand back and let the industry do this. Industry clearly needs to work together, co-ordinate, get information in one place, but Government can integrate the State Pension information, which really ought to be there, can help to make sure there are common standards and vested interests do not get in the way.129
He said the Government “has a huge enabling role” to act as “an honest broker and bring people together”.130 The introduction of automatic enrolment into workplace pensions, which will result in a proliferation of small defined contribution pension pots, makes the introduction of a dashboard more urgent.131
59.The 2016 Budget announced the Government “will ensure the industry designs, funds and launches a pensions dashboard by 2019”, meaning “an individual can view all their retirement savings in one place”.132 This is in line with our previous recommendation.
60.Introducing a dashboard on this timetable will be a challenge. Charlotte Clark, Director of Private Pensions at the DWP, said that many pension records were held on outdated “legacy systems”,133 while Yvonne Braun told us that the many thousands of small trust-based pension schemes may struggle to adapt.134 The Minister noted that standard statements from pension providers were some way from being available.135
61.Age UK sounded a word of caution on digital provision more generally, noting that a substantial proportion of people aged 55 to 64 do not use the internet and that such people were concentrated in lower socio-economic groups. Even those with internet access “may prefer written information on complex subjects”.136 The Minister told us that the Department would continue to provide a service for people who are not digitally enabled and that the digital service would be accompanied by a telephone support system.137
62.The Department has rightly upped its efforts to explain the more complex elements of the reforms and made clear headway in establishing an online system for state pension statements. The Pensions Minister should take credit for this progress. Though the Government will need to ensure that those without access to the internet, or who are uncomfortable using it, are adequately informed, online provision of personalised pension information will clearly become increasingly important.
63.The Government aspires to promote greater private pension saving. In order to best plan for retirement, individuals need to see a complete picture of their state, workplace and personal pensions in one place. We therefore welcome the Government’s commitment to ensuring the creation of a pensions dashboard by 2019. This is in line with our previous recommendation. Achieving it will be challenging and we will continue to monitor progress closely.
Proactive and personalised communication
64.Though the Government’s new state pension communication campaign has evolved, it has consistently sought to raise general awareness of the new state pension and encourage individuals to request statements. Personalised information has not been sent out proactively.
Direct communication
65.In the last chapter, we considered groups of people who will receive less from the new state pension than they might have expected to receive under the existing system. Sally West told us that her “biggest concern” regarding the new state pension was that “people that are going to be less well-off under the new system but may not know it and may not know there is something that they can do about it”.138 For example, individuals may be able to pay additional voluntary NI contributions.
66.In our recent Report on Communication of state pension age changes, we found that the increases in state pension age legislated for in 1995 were particularly poorly communicated. In particular, successive Governments did not directly contact the women affected, relying instead on raising general awareness and sending statements on request. Many women continued to assume wrongly that their state pension age was 60.139
67.Hargreaves Lansdown expressed concern that “the DWP has failed to learn the lessons of its communication failure in respect of the rise in women’s state pension age and may be in danger of repeating the same mistakes all over again” with the new state pension.140 In the last chapter we concluded that it had been insufficiently clear in Government communications that only a small minority of people will receive the flat rate new state pension in the early years of the reform.
68.We questioned the Department on why they were not sending statements proactively. We were told:
- there are likely to be mistakes or gaps in address records;141
- direct communication has a “notoriously low response rate” and is poor value for money;142 and
- it is inappropriate to send personal details such as dates of birth and projections of pension entitlements without permission,143 at least partly for legal reasons relating to the Data Protection Act 1998.144
69.Duncan Gilchrist clarified that the Department’s legal advice did not preclude sending letters to large numbers of people but did restrict the personalised content of those letters.145 This represented a change in interpretation of the Data Protection Act 1998: between 2004 and 2006 the DWP sent around 16 million unprompted Automatic Pension Forecasts which included a personalised projection of state pension entitlement at state pension age.146
70.Robin Ellison, Head of Strategic Development for Pensions at Pinsent Masons, a law firm, and Visiting Professor of Pensions Law and Economics at Cass Business School, told us that Government Departments often took a very cautious approach to data protection. This was true of the Department:
it is known that, for understandable reasons, in practice DWP lawyers give cautious advice which in the private sector might be more robust, especially given possible political implications which do not normally apply in the private sector. For example, it is possible to envisage criticism by a select committee if a certain percentage of letters went astray; the DWP is damned if they do and damned if they don’t.147
71.Noting the caveat that DWP lawyers may hold information that he does not, Mr Ellison concluded:
even though there may be risks (quoted somewhere as 3%) that personal information may end in the wrong hands, the issue is whether an exercise is sensible, proportionate and reasonable in the circumstances. Most advisers, even though of a cautious disposition, would have thought that sending a circular letter in these circumstances, even with personalised information, would not have aroused the ire of the [Information Commissioner’s Office] or given rise to a legal challenge in the courts by an individual whose private information was affected by such a decision.148
72.Age UK suggested that people who will receive less under the new state pension than they would notionally have done in the existing system and people with gaps in their contribution record should be contacted individually by the Department. This could enable some such people to address gaps in their contribution record or plan more accurately for retirement.149
73.We recommend that, as a matter of urgency, the Department write to people it projects will reach pension age with:
- fewer than 10 qualifying years; or
- lower state pensions than they would have derived from a spouse’s contributions under the existing system; or
- gaps in their contribution record.
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. If the Department has any doubts regarding the lawfulness of such letters under the Data Protection Act 1998 it should seek the advance approval of the Information Commissioner.
74.We recommend the Government provide a new state pension telephone hotline service for the recipients of these letters. This service should enable claimants to discuss with an expert a strategy for increasing state pension entitlement that is most appropriate for their individual circumstances. This service might be provided by an existing pensions guidance service.
Regular automatic statements
75.The Government’s current approach to state pension statements, whether hard copy or online, is reactive; individuals only receive statements if they request them. People aged over 55 can currently request a statement, though the Department expects “a much wider age group” to have access to the forthcoming digital statements.150 Witnesses argued that statements should instead be sent proactively, to increase understanding of state pension entitlements, encourage informed retirement planning and alert people to means of increasing their entitlement.151
76.The Department issued 16 million Automatic Pension Forecasts (APFs) between 2004 and 2006 to people aged between 20 and 64.152 In our last report we noted that the main APF letters did not refer to changes in the state pension age.153 Nearly 9,000 individuals were interviewed 13–17 weeks after they were sent those letters as part of an extensive survey of the APF programme.154 Richard Caseby cited evidence from that survey in arguing that “direct mail is very expensive and it does not offer a lot of value for money”.155
77.One third of survey respondents recalled the nature of the communications, unprompted. Over half recalled receiving some information from the Government or Pensions service, a proportion that rose to more than six in ten when prompted about the content. One third of all respondents said they read the letter or the accompanying leaflets, while a further quarter of respondents said they had glanced at them. The research report on the survey noted that “recall and readership increased with age”. Among those aged 50 and above, eight in ten recalled receiving the APF and over half (54%) said they read some or all of it.156
78.The research report on the survey noted that “views on the APF were generally positive”. Three-quarters of people who at least glanced at the APF found it useful while 80% of those who could recall receiving it (half of all recipients) thought it improved their understanding of pensions. This feedback was most positive from respondents aged 50 and above. 157
79.The Pensions and Lifetime Savings Association said the Department should target communications on those approaching state pension age:
These individuals are more likely to be considering their retirement plans and potential income. Such individuals are also more likely to have greater certainty about their State Pension age.158
The Hanover Housing Association suggested that statements should be sent automatically to people aged over 55, and on request to those aged under 50, as a “starting point”.159
80.Aegon UK argued that the policy of restricting statements to people aged 55 and over was significantly flawed as, under pension freedom and choice reforms, people can now access their private pension from 55. The restriction could therefore hinder retirement planning. Instead, they said, people should be contacted proactively “well before their 55th birthday”.160
81.Deborah Cooper, of Mercer, told us that changes in individual circumstances, or those of a friend or relative, could prompt people into taking more interest in pensions than usual. While the Department would not be aware of those changed circumstances, by sending regular statements it was more likely to take advantage of that increased interest. She argued:
if you send information regularly enough, and you make it clear enough why it is important to them, sometimes they will take notice. I think that is the best you can do. You cannot expect that people will react if you write to them once.161
82.In evidence to our predecessor Committee on plans for the new state pension in 2013 the Minister, then an independent pensions expert, said “I think it is important that people get regular statements that help them […] plan.”162 Kate Smith echoed this call, drawing on comparisons with the private sector:
We need to issue personalised benefit statements in the same way we do in the private sector to everybody, not just once but regularly, so they have an up-to-date picture of exactly what they are going to get from the state pension and when.163
83.Proposals for annual statements are not new. In response to a request by the House of Commons Social Security Committee, the Contributions Agency committed in 1995 to “looking at issuing a NI Account Statement to each contributor”.164
84.The Government’s pensions strategy is predicated on people engaging more with their pension savings and better planning for retirement. By relying on individuals requesting a state pension statement or generating one on a website, the Government risks missing those it most needs to reach.
85.We recommend the Government sends automatic state pension statements to all people aged 50 and over. These should be issued annually, in line with the private sector. Individuals should be able to choose to receive their statement by email or opt out on the digital statement system. Such individuals should still be informed by post of any major policy changes that affect them.
109 Work and Pensions Committee, Fifth Report of Session 2012–13, The Single-tier State Pension: Part 1 of the draft Pensions Bill, HC1000, March 2013
110 HC Deb, 19 March 2013, col. 44WS
118 See, for example, Personnel Today, 13 January 2015, Shared parental leave: more than half believe childcare should be shared, by Jo Faragher
121 For example, Q85 (Kate Smith), Q86 (Deborah Cooper); Mercer (USP0106); Hargreaves Lansdown (USP0023); Aegon UK (USP0119)
126 Oral evidence by Yvonne Braun on Pensions automatic enrolment, HC 579–ii, 24 February 2016, Q111
127 Work and Pensions Committee, First Report of Session 2015–16, Pension freedom guidance and advice, HC 371, October 2015, para 39
128 HM Treasury, Pension freedom guidance and advice: government response to the Work and Pensions Committee’s first report of session 2015–16, Cm 9183, December 2015
131 Steve Webb quoted in This is Money, 9 March 2016, Retirement saving should be made more ‘fun’ with apps and games, says pensions minister
132 HM Treasury, Budget 2016 Red Book, HC 901, March 2016, para 1.114
133 Oral evidence by Charlotte Clark on Pensions automatic enrolment, HC 579–iii, 9 March 2016, Q198
134 Oral evidence by Yvonne Braun on Pensions automatic enrolment, HC 579–ii, 24 February 2016, Q112
135 Oral evidence by Baroness Altmann on Pensions automatic enrolment, HC 579–iii, 9 March 2016, Q196
139 Work and Pensions Committee, Seventh Report of Session 2015–16, Communication of state pension age increases, HC 899, March 2016
152 DWP Research Report No. 447, Evaluation of Automatic State Pension Forecasts,2007
153 Work and Pensions Committee, Seventh Report of Session 2015–16, Communication of state pension age increases, HC 899, March 2016
154 DWP Research Report No. 447, Evaluation of Automatic State Pension Forecasts,2007
156 DWP Research Report No. 447, Evaluation of Automatic State Pension Forecasts,2007
157 DWP Research Report No. 447, Evaluation of Automatic State Pension Forecasts,2007
164 The Contributions Agency Annual Report 1994/95 (HC 503 1004/95). The Contributions Agency was an agency of the Department of Social Security, the predecessor to the DWP.
© Parliamentary copyright 2015
Prepared 24 March 2016