Thursday, 31 December 2015


The Department for Work and Pensions has finally answered two Freedom of Information requests about the new state pension and the letters written to women whose pension age was postponed twice. Initially both requests were refused.

Pension letters destroyed if not delivered
Letters written to women warning them of rises in their state pension age which were returned undelivered by Royal Mail were destroyed and no further action was taken to find the women concerned. No record was kept of how many letters were returned.

Part of the changes to state pension is the rise in the State Pension Age. This has hit women harder than men and data provided under FOI showed that the Department failed for 14 years to begin to inform women of changes passed in 1995. That exercise began in 2009 and was halted in March 2011. Women's state pension age was changed again in November 2011 and the DWP then restarted writing individual letters from January 2012 to inform women of their new state pension age including both changes. That was often the first they had heard of any change. But many women claim they never received such a letter.

A global study of data quality to be published by the credit reference and address validation agency Experian found that 23% of customer prospect data - including names and addresses - contained errors. That does not mean nearly a quarter will not arrive. But many were clearly at risk of not doing so. That raises the question of what the Department did to deal with this problem.

Initially the DWP refused my Freedom of Information request for more details of how many letters were returned and what happened to them, on grounds of cost. But on review the DWP agreed to give answers.

  • QUESTION: What information does the DWP hold on how many of those letters in any or all of those batches were returned by Royal Mail?
  • REPLY: DWP no longer has access to this information. To support the principles of the Data Protection Act 1998, DWP has a Records Management Policy. This confirms the retention periods for DWP products and, in line with this Policy, there was no specific reason to retain these letters.
  • QUESTION: When letters were returned as above what further steps were taken to try to find the people concerned?
  • REPLY: The letters were issued to the customers’ latest address held on HMRC records. No followup action was taken on any letters that were returned undelivered as DWP had no further information on the customers’ whereabouts. 

No state pension
Women are the big losers from a new rule under which people with fewer than ten years of National Insurance contributions get no new state pension. Under the old rules (since 2010) people with under ten years contributions get a pro rata pension of 1/30th of the full amount for each year of contributions. Under the new pension they get nothing. Nearly three quarters f those affected will be women.

On 14 January 2016 the DWP published Impact of New State Pension (nSP) on an Individual's Pension Entitlement which shows that from 2016 to 2050 a total of 110,000 people will get no new State pension because they have fewer than ten qualifying years of NICs. Of those 110,000, 80,000 (73%) are women and 30,000 (27%) are men.

The estimate of around 3200 people a year is rather lower than those published in the Impact Assessment in May 2014. Those lacked some detail and were not broken down into men and women. But the table showed that in each of the five years from 2016/17 to 2020/21 between 9000 and 12,000 people living in the UK would be denied a new state pension because of this rule. That is between 2% and 3% of those reaching state pension age in that period and a total of between 45,000 and 60,000 in just five years. A further 6000 to 10,000 a year who lived abroad would also would not qualify which is 18% to 23% of those living abroad reaching state pension age (see Table 3.1 on p27).

Further information
Women will get less than men from the new state pension
Women given just two years' notice of state pension age rise 

version 2.00
1 March 2016

Wednesday, 30 December 2015



Flood Re is part of a plan which is intended to ensure that homes at a high risk of flooding will be able to obtain buildings and contents insurance at a reasonable cost.

It begins throughout the UK on 4 April 2016. From that date an estimated 350,000 dwellings at high risk of flooding will be put into the Flood Re scheme.

Flood Re will be funded by a levy on all insurance companies. From 4 April 2016 all home insurance policies will include a supplement which will pay for that levy. The Government has estimated that will add around £10.50 a year per policy. It will almost certainly not be shown separately on insurance premium bills. But as part of the premium it will be subject to insurance premium tax of 9.5% which would add £1 to that amount. The levy will be reviewed in the first five years of the scheme and if it changes the supplement could change too. Almost all insurers are expected to join Flood Re and all of them, in Flood Re or not, will pay the levy based on the amount of home and contents business they do.

In Flood Re
If your home is put into the scheme by your insurer the flood risk element of your insurance will be charged at a fixed rate depending on your council tax band (valuation band in Northern Ireland). The amount for combined buildings and contents will range from £210 a year for the lowest band properties through £276 in the mid-range to £1200 a year for the highest. If you insure just the buildings or the contents the amounts will be lower. Details here 

Those are the fees that Flood Re will charge your insurer for taking on the flood risk. The insurer can pass those costs on to customers or can charge more or less than that for the flood risk. Charging less is very unlikely. The excess on the policy - the amount that has to be paid by the insured in the event of a claim - will also be fixed at £250 on this flood risk element. But again your insurer can charge whatever excess on this part which it chooses.

The rest of the insurance against all other risks will be estimated and charged as normal by your insurer on top of the amount for the flood risk. There is no guarantee what these premiums will be or what excess will be charged. The premium you pay will include all risks, including the flood risk passed to Flood Re, and you will not see those as separate elements in your premium. 

Your home will only be put in the scheme if your insurer chooses to do so. It is not clear if there will be any mechanism to request a property is or is not put into the scheme or to appeal against a decision. 

Flood Re expects to have 350,000 properties passed to it in the first year. It claims it can accommodate more than that but it is entirely up to insurers to decide which properties to include. The Environment Agency has estimated that more than 5 million homes are at some risk of flooding.

If a claim arises for flood damage the householder will claim directly to their insurers not to Flood Re which will have no contact with consumers.

Excluded from Flood Re
Some properties will specifically be excluded from the scheme even if they are at high risk of flooding. These include

·         Homes built from 1 January 2009
·         Purpose built blocks of flats
·         Houses converted into flats. But if the freeholder lives there and there are only one or two other units it can be part of Flood Re.
·         Buy to let property where the landlord arranges insurance.
·         Commercial property
·         Mixed use property – for example flats over shops.
·         Social housing buildings – but contents can be part of Flood Re.

The rules are complex. More details from Flood Re  

It is not clear whether or at what price these excluded properties will be insurable.

May be excluded in future
Flood Re Chief Executive Brendan McCafferty has said that homes liable to frequent flooding could be excluded from the scheme if the owner did not invest in flood resilience measures. Flood Re would gather information over the next few years and decide if these homeowners could be taken out of the scheme after three claims. He also some very high risk properties that flood every year or two could be excluded from the scheme whatever steps they took.

Not in Flood Re
If your home is one of the estimated 5 million or so homes at some risk of flooding but is not in Flood Re then insurers will no longer make any guarantees about providing insurance nor about the level of premiums or excess charged on these homes. The existing deal called Flood Insurance Statement of Principles will end on 4 April 2016 when Flood Re begins.

The Statement of Principles, which in one form or another was in force since 2000, guaranteed that your existing insurer would offer insurance – though at an uncapped premium – and included all properties. From 4 April 2016 all homes not in Flood Re will be subject to normal market forces including those at risk of flooding. Insurers can refuse to insure homes at flood risk or insure them on any terms, with any premium or excess they choose. The industry hopes that firms will be able to offer insurance on all property either by putting it into Flood Re or, if the risk of flooding is low, then taking on that risk in the normal way. But whether that happens remains to be seen.

The future
The Association of British Insurers says that in the 1990s there were three flood events which led to claims of £150m or more. This century there has been one a year. Further bad weather will test this latest effort to provide insurance to its limits.

Matt Cullen of the Association of British Insurers and Brendan McCafferty, Chief Executive of Flood Re, explained the scheme from their point of view on Money Box 9 January 2016.

Version 1.2
12 January 2016

Wednesday, 9 December 2015


Are all the niggles and unfairnesses of the new State Pension there because of the pressing need to ensure it costs no more than the old one? 

I gave my evidence to the Work & Pensions Select Committee in Parliament on 25 November 2015. Before I was questioned the MPs quizzed the former Pensions Minister Steve Webb. He lost his seat in the General Election and is now Director of Policy at the insurers Royal London.

He admitted quite frankly to the Committee that his reforms of the state pension – which begins on 6 April – had to be done at nil cost. Or as he put it “When I went to the Treasury wanting to reform the State Pension, the one thing they said to me is—and I paraphrase slightly—‘Steve, you can do what the hell you like, just don’t spend any more money.’”

In fact the new state pension will, in the long term, cost less than the present one. Job done. But the more I looked at the various groups and campaigners who are complaining about how the new state pension will treat them the more I thought that every niggling unfairness about it came from Steve Webb’s nil cost brief.

Now, without sounding too much like Meryl Streep and Steve Martin, it’s complicated. So bear with me.

1. Women born 6 April 1951 to 5 April 1953 all reach state pension age before the new state pension begins. So they won’t get the new state pension. But men of the same age – who will be 65 when it begins – will. That is sex discrimination and they want the choice to have new or old.

2. The problems of women born 6 April 1953 to 5 April 1959 were covered in this newsletter two weeks ago. They were told about their state pension age rise just a couple of years before they were 60 and their age was raised not once but twice. That didn’t happen to any men.

3. As I reported here three weeks ago women will generally do less well than men out of the new state pension. Even by the 2050s one in seven women won’t get the full amount because they don’t have 35 years’ contributions compared with one in ten men. It is also expected that more women than men will not get a pension at all because they won’t get the minimum ten years’ contributions.

4. The new state pension will not allow women to claim a pension on their husband’s contributions either while he is alive or after his death. If they have an inadequate pension of their own they will have to rely on means-tested pension credit which is itself being cut by up to £13 a week.

5. Transitional rules cut back on the new State Pension for anyone who was not paying into SERPS and the State Second Pension which topped up the basic pension. As a result many will get little more than the old state pension in the first years of the new scheme. DWP figures show women are more likely to be affected than men.

6. And finally the cold-towel-round-head rules which affect people who were in company schemes. Under these rules the DWP will no longer inflation-proof part of their company scheme through the state pension. This rule will probably affect men more than women.

All those six items cut the cost of the new state pension. And of course help it to come in under the cost of the old as the Treasury demanded of Steve Webb. All of them leave some groups – mainly women – feeling unfairly treated. Perhaps it’s a price worth paying to simplify the state pension and keep it affordable in the long term. But we should at least be clear who is paying that price.

Oral evidence by Steve Webb, me, and Sally West from Age UK.

Version 1.01
7 March 2016