DWP warns people may see payments reduced when they claim State Pension

A DWP minister has said some pensioners could see some of their payments reduce when they start to claim the state pension.

The issue came to light after a written question in Parliament about from Liberal Democrat MP Victoria Collins about "state pension integrated practices".

She wanted to know specifically is if the DWP had looked at how certain groups were affected by the issue, including those who are paid less during their working life and women, and if there were any plans to review guidance or legislation related to the subject.

Pensions minister Torsten Bell provided a response from the Government. He first explained how integrated pensions work: "The aim of 'integrated' pension schemes is to provide a more predictable and stable pension income over time where a person's occupational pension comes into payment before their state pension.

"This is achieved by paying a higher pension before the person reaches state pension age, which is subsequently reduced when their state pension comes into payment."

An integrated pension plan is arranged by your employer with your social security benefits counted as part of your total payout.

The idea is to reduce how much you need to contribute into your pension, although this does mean you will get a lower payout from your private pension than you may otherwise get.

The state pension age for both men and women is currently 66, but this is gradually increasing to 67 between April 2026 and April 2028.

Mr Bell admitted that the lower paid and female pensioners may face a larger reduction in their private pension, as a proportion of their entitlement, when their state pension kicks in.

He explained: "This is due to societal and labour market issues during their working lives, which has resulted in these groups having, on average, lower earnings and therefore receiving a lower pension from the scheme."

He went on to say it is vital for people to have clear information about how their occupational pension scheme works so they can make "informed decisions" about their retirement.

He said the trustees are required to share relevant information with members of their pension scheme including how integration would affect their payouts.

Mr Bell shared some guidance for pensioners: "If someone does not think that their scheme has been sufficiently clear about the way integration will affect their pension, they should use the scheme's internal dispute resolution service, which every scheme is required to have.

"If they are not satisfied with the outcome, they can take the matter to the Pensions Ombudsman." However, the minister also explained that the exact design of a person's pension benefits if between them and the trustees, and is not in the DWP's remit.

He said: "Pension scheme rules on the calculation of benefits are many and varied and are a matter for employers and scheme trustees to decide."