The UK’s spending watchdog has said that the government’s decision to postpone complex digital reforms in creating the new state pension allowed it to meet its implementation deadline – but that operational savings have been slashed.

The NAO said sticking to a minimal digital product ensured the new state pension was introduced on time – Photo credit: Fotolia

In a report published today, the National Audit Office said that the government ‘recognised the risks’ of introducing the new state pension and that it met the legislative deadline by choosing to make only minimal changes to IT systems.

The new state pension, which was introduced in April 2016, changed the way pensions are calculated to reduce the long-term cost to government, and aims to help people better understand how they can save for retirement.

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The government initially committed to introducing the new state pension by April 2017, but in March 2013 it brought that deadline forward by a year.

This increased the risks faced by the Department for Work and Pensions, the NAO said, and in July that year the department decided to focus on bringing out a minimum product; the digital services were later split from the rest of the programme.

“[The department] recognised the risks of introducing the new state pension,” the report said. “From July 2013, it focused on adapting existing IT systems and deferred the development of a more ambitious digital solution that offered operational efficiencies and new customer services.”

This meant focusing on introducing a digital pensions statements service, which was introduced in February 2016, and leaving business processes unchanged.

The NAO said that there was uninterrupted payment of state pension from the go-live date in April 2016, and that the project has so far stayed within its budget, costing £57m up to March 2016.

However, the focus on policy delivery meant that DWP had to postpone the introduction of a number of planned digital services.

A new comprehensive digital claims service is now not expected until April 2017, with some elements still expected to rely on legacy IT systems in the short term.

Meanwhile, the NAO said that change of circumstances services were delayed because GOV.UK Verify was not able to support change of address in at the time the pensions service was being developed. The report said this would “potentially” be available from 2018.

The NAO also said that DWP now plans to spend £3.1m to extend the life of its legacy IT systems beyond 2018.

It has also significantly reduced its estimate of operational savings from the switch, from £341m to £73m.

The report, which also looks at the processing of new claims and the effectiveness of the communication campaign, said that overall the DWP’s implementation on the new state pension did represent value for money.

It concluded that the department had “reduced risks by de-coupling plans for new digital services and working with HMRC to conduct extensive testing of systems used to calculate entitlement”.

But despite the praise for the cautious handling of the digital side of the project, the report said that it was “not yet clear” if the simplified system would improve the understanding of retirement savings among the public.

The report set out a number of recommendations for the government to ensure continued value for money and future success.

These include developing proposals to evaluate the new digital services to understand their impact on both administrative savings and customer service, and to test its systems and validate data quality.

The report comes two days after Joy Bramfitt-Wanless, the service manager for the Check Your State Pension service, published a blogpost in which she described the process as being “an incredibly difficult journey with many barriers to overcome”.

However, she added that it had been worthwhile, and that the public had been positive about the service, which is still in its public beta phase.

“In September, of the total number of people who checked their state pension, more than 92% did it online using our service,” she said. “We’ve proved government services don’t have to be complicated, and that people will use them if you take away the barriers.”