Women’s State Pension Age Changes
A Brief for the Report Stage – Pensions Bill (HL)
by Dr. Ros Altmann
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Ahead of a possible Report Stage vote on Wednesday 30th March, Saga would like to provide you with important background information, to help Members better understand what is being proposed and consider possible alternatives.
We have been inundated with letters and emails from women distraught and desperate about the unfairness of these changes and asking for our help. We have started a petition on the Saga website which has already been signed by thousands of women. They feel betrayed by this Government, especially after its Coalition Agreement promised their pension age would not rise again before 2020.
Saga believes the Government needs to think again on this and act more fairly. The current proposals involve both gender and age discrimination. Women of a particular age (around 56 or 57) are being targeted to bear the brunt of all the cost savings on pensions. These women, and men of similar age who would have needed Pension Credit, are being forced to shoulder an unfair share of this cost-saving. They are the most vulnerable and least able to cope without their state pension payments.
What is being proposed:
The Government has decided to renege on its Coalition Agreement, by increasing the State Pension Age for women from 2016, even though it assured these women that it would not start raising pension age again before 2020.
Women’s pension age was already increased under a timetable set in 1995, with the women’s pension age rising from 60 in 2010, to reach 65 – i.e. the same as for men – by 2020. The women affected all accepted this without fuss and set about planning their finances to accommodate the increased pension age. However, these same women, who had already accepted that their pension age would increase by 3, 4 or 5 years, are suddenly being told that they will not get the State Pension they were relying on. They are having to wait up to an extra 2 years.
How many women does this affect?
Over half a million women are having their state pension delayed by more than one whole year.
300,000 are having their pension delayed by more than a year and a half.
These women will be losing thousands of pounds of state pension that they were relying on, to fund their future. Those who have been delayed by two whole years could be losing well over £10,000 and, if they would be eligible for Pension Credit, they would lose over £14,000.
Why is this unfair?
Targeting same women twice, despite promising not to:
The Government seems to have targeted the same group of women twice. Having raised their state pension age a few years ago, they have made careful plans which will include receipt of their state pension according to the agreed timetable. Even last year, they were promised, by this Government, that there would be no further changes for them. Then, suddenly, with only five, six or seven years’ notice, they are having their state pension snatched away from them. Many have told us they feel like the Government has gone into their bank account and taken away thousands of pounds.
Women’s pension age is rising by up to 2 years: no man will see more than a one year rise:
In fact, between 2010 and 2020, women’s pension age will rise by six years, while men’s age will rise by just one year.
Women are being given six years’ notice of a two year change, while men are being given seven years’ notice of a one year increase:
These particular women are already in their late fifties and have no time to make alternative plans. They are not being given enough notice of such a huge change.
Women are much more reliant on the state pension as they had less chance to build up private pension:
DWP figures show that 40% of women of this age have no private pension wealth at all. Most of them worked part-time in their early careers and part-time workers were banned from company pension schemes until the 1990s. They also earned less than men, so they had less chance to build up a private pension than men.
These women have less private pension than men:
Even those women who do have a private pension, have much less than men. DWP figures show that women’s pension assets are only one tenth as much as men’s. Even those in final salary schemes are entitled to only half the amount that men receive. Therefore, state pension income is far more crucial to these women than to men of the same age.
Around 35% of these women will be single when they reach their 60s:
With the increase in divorce, many more of these women have no husband to rely on for a pension, so their own pension is crucial to them.
Many of these women are already retired, or caring for older or younger relatives:
These women will not have a chance to make up their losses because they are not even in work. Having already reached their late fifties, they have planned to be able to manage on their savings until state pension age, and are having to care for others – which itself is saving society substantial sums.
Many of these women are ill, with shortened life expectancy:
Many of those who have written to me are already ill, some who have had cancer, or arthritis, or strokes and are distraught at the delay. They know they have a shortened life expectancy, have often made contributions and now feel betrayed by the news that the Government is taking away their state pension.
What reasons has the Government given for ploughing ahead with the changes?
- It says it 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 increases for everyone until 2020. It is also certainly not any justification for increasing women’s pension age by even more than that of men.
- It says it has to save money due to the deficit problems
There will be no money saved in this Parliament, so the argument about fixing finances and overcoming the deficit does not stand up to scrutiny.
- It says that life expectancy is increasing so it has to raise state pension age
That is true, but does not require this sudden increase in pension age being imposed at short notice on one group of women who have already seen a sharp rise, which they have accepted and planned for.
- It says it has to put pensions on a sustainable long-term footing and costs are rising
The argument about long-term sustainability is well made, but still does not justify the sudden increase being imposed on one group of women at such short notice, especially when the Government knows that these particular women are more vulnerable than men and have little or no private pension wealth. Also, that many are already out of the labour market and have made careful plans for their future. 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 having to rush to do it now so unfairly.
- It says that these women can go onto unemployment benefit
For many of them, this is not an option and, in any case, this will not replace two years of lost pension. It also says they can keep working but, if they are already retired or caring for others, that is not an option. This is not a reason to behave so unfairly.
What could the Government do instead?
- Delay the increase in State Pension age until 2020 and then accelerate the rise to 66 by April 2021. This would, according to DWP figures, result in an extra cost of around £7billion (Lords Hansard, 1st March 2011, col. GC123).
- At least ensure that no woman faces an extra pension rise of more than one year
This would, according to DWP figures, cost an extra £4billion (HL 7234, col. WA415, 9th March 2011).
- Protect the most vulnerable women (and men) from the pension increase by ensuring Pension Credit remains available to people under the current women’s pension age timetable. According to DWP figures, this would cost an extra £800million (HL 7233, col. WA 414, 9th March 2011).
|Number of women facing increased state pension age of over one year
Number of women facing increased state pension age of over 1½ years
Number of men facing increased state pension age of over one year
|Proportion of these women who are single (no husband to rely on)
Proportion of these women with no private pension
For those with private pension, amount of pension wealth relative to men
For those with final salary pension, amount relative to men
|Number of years of pension age increase for women between 2010-2020
Number of years of pension age increase for men between 2010-2020
|Number of years’ notice of 2-year rise in pension age for women
Number of years’ notice of 1-year rise in pension age for men
|Cost of delaying pension age increase to 2020, then reaching 66 by 2022
Cost of delaying pension age increase to 2020 then reaching 66 by Apr 2021
Cost of ensuring no woman faces more than a one year increase in SPA
Cost of keeping pension credit age on current timetable to protect poorest