Saga Briefing Explains Why Government Plans To Raise State Pension Age Must Change

by Dr. Ros Altmann

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The Politics

The proposed Pension age changes have, without doubt, contributed to the Government's - and particularly the Conservatives' - falling popularity among women.

A group of older women are very angry. Many of them have written to me, some have written to their MPs, and others say they don't believe it is worthwhile writing to their MPs, as the Government will not listen to them anyway. They remember that it was the Conservative Government in 1995 who increased their pension age, which they quietly accepted, but they now feel taken advantage of and treated like a 'soft target' because they have been given such short notice of another major change. They feel the move is discriminatory and manifestly unfair.

  • The proposals impact women far more than men.
  • The plans demonstrate a lack of understanding of the realities of many of these women's lives. They feel betrayed that the Conservatives have hit them a second time and by far more than men.
  • They feel that male policymakers and their advisers just assume they all have husbands they can rely on for a pension, so not getting their state pension will not matter. That is simply not the case!

The changes will start in 2016 - so will be imminent at the time of the next General Election, and voters then will be reminded by Labour of how the Coalition Agreement was broken, Conservative promises on women and pensions cannot be trusted and so on.

The changes will not save any money in this Parliament, so they are nothing to do with cutting the budget deficit now. And if they are about long-term sustainability of pensions, the women cannot understand why they should be treated so much more harshly than men, especially when these older women have had far less chance to accrue private pensions and also receive much less state pension than men as well, since our pension system has in the past discriminated against women.

It is clearly unfair to increase women's pension age by more than men and give them much less notice. It is hard to see how MPs can justify more than a one year rise for all.



The facts

  1. Women's pension age rising by more than men's - no man facing more than a 1 year rise
  2. Women being given less notice than men as women's pension age will start rising from 2016 but men's pension age does not start increasing until 2018.
  3. These particular women are much more reliant on the state pension than men, as 40% of them have no private pension at all, so not receiving a state pension is far more serious for women than for men as it is often these women's only source of pension income.
  4. 37% of these women are already retired in their late fifties (unlike most men), often caring for relatives.
  5. These women earn less than men so have less chance to make up any lost pension.
  6. These women have less private pension than men and were often banned from private pension schemes earlier in their careers.
Number of men facing increased state pension age of more than 1 year NONE
Number of women facing increased state pension age of over one year 500,000
Number of women facing increased state pension age of over 1½ years 300,000
No. of years of pension age increase for women between 2010-2020 6
No. of years of pension age increase for men between 2010 -2020 1
Number of years' notice for start of rise in pension age for women 5
Number of years' notice for start of rise in pension age for men 7
Proportion of these women who are single (no husband to rely on) >30%
Proportion of these women who are already out of the labour force 37%
Proportion of these women with no private pension 40%
For those with private pension, amount of pension wealth relative to men One eighth


The unfairness

  1. One group being asked to bear unfair share of burden of long-term savings: By virtue only of their date of birth, a particular group of women is being singled out to bear a disproportionate share of the burden of necessary long-term savings in state pension costs. The need for sustainability over the long-term can be achieved in a fairer way by spreading the costs more evenly over a slightly longer time period.
  2. Many of these women are ill, with shortened life expectancy: Many of those who have written to me are seriously ill (with cancer, arthritis, strokes etc.) and are distraught at the delay, after making careful financial plans to manage until they get the state pension. They feel betrayed by the Government's changes.
  3. Insufficient notice: These changes have been sprung on women in their late fifties, without giving them time to realistically prepare for the loss of the state pension payments they were legitimately expecting. The Turner Commission suggested giving at least 15 years' notice of changes, whereas these proposals give only 7 years' notice of a two year pension age increase. Saga believes that people should really have at least ten years' notice of a one year pension age change.
  4. Targeting the same women twice, despite promising not to: In 1995, the last Conservative Government increased these women's pension age by three, four or five years, under the 1995 Pensions Act, which legislated for women's state pension age to start rising in 2010 from age 60, to reach age 65 by 2020. But women were given over 15 years' notice to adjust their pension and retirement plans - and they did just that. Many have told us they feel like the Government has gone into their bank account and taken away thousands of pounds that they were relying on for their retirement.
  5. Different outcomes for women of similar ages: A woman born just before April 1953 will receive her state pension at age 62, whereas one born on 6 April 1953 will only receive hers at age 65. Such differentials seem manifestly unfair.

Some Myths

  1. The measures are needed to address the fiscal deficit
    These proposed changes will not save any money in this Parliament. There will be no savings before 2016.
  2. These changes are needed to put our pension system on a sustainable and affordable long-term trajectory?
    These particular changes are not necessary to achieve that. The pension system can be put on a long-term sustainable path by increasing state pension age more quickly in the future years, rather than rushing to do it now so unfairly just in the 2016-2020 period. In fact, moving to age 66 will not put pensions on a sustainable long-term path anyway, because life expectancy has risen so much that we actually need to move to 67 and beyond as quickly as possible. Therefore, the aim is right and the direction of travel is right, but the speed must be adjusted. Starting a bit later would allow people fair notice to prepare their life plans. The current proposals are causing distress while still not solving the underlying problem!
  3. Life expectancy is increasing so state pension age has to rise
    Yes life expectancy is rising and yes we need to increase state pension age, but the speed of change has to be reasonable. Rising longevity does not suddenly require change to be imposed at short notice on one group of women who have already seen a sharp rise, which they have accepted and planned for. However, it does mean that we need to increase state pension age beyond age 66 much more quickly than planned.
  4. Government cannot increase men's pension age before women's due to EU law
    This is not a reason to punish women, it is a reason to delay the rise for everyone until 2020! It is also does not justify increasing women's pension age much more than men, whose age rises no more than 1 year.
  5. These women can go onto unemployment benefit if they are out of work
    This is no comfort. Out of work benefits will last only six months and are far less than state pension. They feel this is an insult.
  6. These proposals do not really break the Coalition Agreement
    The Coalition Agreement stated: ''The Parties agree to... hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.'' This was a clear commitment. Women's pension age would not start rising to 66 before 2020.

Saga's Perspective

Saga supports the Government's intention to accelerate increases in state pension age, in recognition of the great news that people are living ever longer. Life expectancy is rising faster than anticipated by the 2005 Pensions Bill, and the costs of supporting an increasingly ageing population will clearly require adjustment in the age at which state pensions start to be paid in future. However, Saga believes people need fair notice of future changes, giving them reasonable time to prepare. The current proposals do not do this. In particular, these proposals force the brunt of cost savings onto one group of women, already in their later fifties, and these women had already accepted a 3, 4 or 5 year pension age rise imposed by the last Conservative Government in 1995.

Saga believes the Government needs to adjust its plans. This need not be 'u'-turn, but is a better way of moving along the same road. Women should not be singled out and treated more harshly than men (especially after the Coalition Agreement promised not to). I have been inundated with letters and emails from women who cannot understand why they have been singled out to bear the brunt of long-term cost savings on state pensions. Saga does not understand this either. The women who have written asking for my help feel betrayed by the Conservatives, they feel their needs have been ignored and the reality of their lives has not been understood by Government policymakers.



Conclusions

Saga believes the Government needs to rethink its plans for accelerating state pension age increases. The current proposals involve both gender and age discrimination. The particular women affected by the proposals, aged around 56 or 57, are shouldering a clearly disproportionate share of the cost savings on pensions that are needed to help improve the nation's long-term financial health. Ideally the Government should wait until 2020 and then increase pension age faster thereafter, but at the very least, no woman should have to face a bigger pension age rise than men - i.e. changing the timetable to ensure no more than a maximum one year change to women's pension age.


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