Best pension stories of 2021 by Steve Webb for This is Money

Former Pensions Minister Steve Webb is our agony uncle and we’ve compiled six of his best and most popular answers to readers in 2021.

The state pension and contracting out is the topic that comes up most often in Steve’s inbox, but he is always willing to tackle fresh questions about it as they arise, and you can find a recent column on it below.

Although Steve can’t answer all questions, everyone who writes in automatically receives links to previous replies explaining why some people do not qualify for the full new £179.60-a-week state pension.

This is Money readers also often ask Steve if their financial adviser is overcharging them to mind their pension investments.

He explained when advisers are value for money and when you might consider cutting them loose in answer to a question this year.

People also write to Steve for advice about their employers shirking pension duties.

Readers in this situation usually have no one else to turn to in confidence about taking the daunting step of turning whistleblower on their bosses, so Steve tries to help if he can.

Read about these and other topics below in columns by Steve, who is now a partner at pensions consultant LCP.

Keen readers can find a full list of Steve’s past columns here. 

If you have something you would like to ask, scroll down to find out how to send in your own pension question.

A reader wanted to know how they had managed to earn a pension well over the full flat rate in less than the minimum 35 years it normally takes to qualify for one.

Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below

As Steve said: ‘We get a lot of letters from people who are querying why they are getting less than the flat rate (often to do with having been in a “contracted out” pension at some point), so it is nice to hear from someone who is set to get more than the flat rate.’

He explained the various scenarios in which people could end up with higher state pensions.

Steve added that he often hears from people who retired under the old pre-April 2016 system, wanting to know why they are on the old basic £137.60-a-week, while people who retired later get more.

He reassured older retirees that they are not being treated less favourably.

If you retired before 2016 and receive less than £179.60, in most cases this is because you didn’t build up any (or only a small amount of) State Earnings Related Pension or SERPS, usually because you were contracted out or self-employed.

Another reader asked Steve last year how much damage their state pension would take from being contracted out, and he replied here. 

Steve heard from a reader who paid an adviser a percentage of their £400,000 pot to get investments set up at retirement, and was still forking over a chunky annual fee on an ongoing basis.

They wanted to know if they could cancel that arrangement, and just consult their adviser if and when needed for a one-off fee instead.

Steve said: ‘Whilst 1 per cent is a “nice round number”, there aren’t many things for which you would pay £4,000 without asking a lot of questions first!’

He ran through the various reasons why receiving ongoing financial advice can be beneficial during retirement, but said any fee needs to be justified and there are things you can do if you are not satisfied.

Exit fees and contractual arrangements – which might commit you to ongoing advice as part of the deal – should be researched carefully before making any decisions, he cautioned.

Employers have a duty to enrol eligible workers into a pension scheme, but a reader discovered his company had failed to do this, then was met with excuses from the boss about it.

Steve was sympathetic to the reader’s concern that the boss would immediately realise the source of any report to The Pensions Regulator, and might retaliate.

He suggested contacting the pension provider used by his employer, if possible in a group with other employees, about missing contributions and if that firm didn’t respond taking the matter to the ombudsman.

The new 1.25 per cent social care levy will be imposed on workers over state pension age, who are normally exempt from National Insurance contributions.

Steve explained how the new system will work, and that for technical reasons older workers will have to start paying the levy from April 2023, a year after everyone else.

Steve receives a constant stream of questions from people wanting to withdraw their pension before they are 55, usually to pay off debts.

He has detailed in the past the dangers of doing this due to the huge tax penalties and scam risks, except in very special circumstances such as terminal illness. 

This time, Steve focused on the alternative ways to clear debts without risking your pension being stolen by crooks or hit by the taxman (and potentially both calamities at once).

‘In some cases, it may be possible to manage your debts so that you are under less pressure to pay them off, or it may be possible to get a Debt Relief Order or use some other way of getting the debts cancelled,’ wrote Steve.

A worrying number of people contact Steve about missing years of pension contributions, having hit a dead end in efforts to trace them through the NHS and other employers.

Steve contacted HMRC to see whether it could weigh in to help under these circumstances, and in a recent column he gave readers details of what to ask and where to address questions.

Several people have written in since then to say they are trying this route, and Steve is waiting to hear their feedback.