Q&A: Women’s pensions

The government confirmed this week that it is pressing ahead with its controversial plan to bring forward the rise in the state pension age (SPA) for women.

Opponents say the changes - which will push up the SPA for women to 66 by 2020, two years earlier than previously planned - will financially disadvantage tens of thousands of women who have not had enough time to plan for the loss of pension income.

Under cross-party pressure, the government this week pledged to look at ways to ease the transitional burden on those who will be most harshly affected by the reforms. We set out the key issues, who is affected and what the compromises may be.

What are the plans?

Under the Pensions Bill, men’s and women’s state pension ages will be equalised at 65 in 2018 and will then gradually increase to 66 by 2020. The amendment, announced by chancellor George Osborne last October, is in contrast to the coalition government’s initial agreement, which stated that the rise in SPA to 66 for women would not happen before 2020. The government says its revised, faster timetable will reduce pressures on public finances by about £30bn between 2016-17 and 2025-26.

Who will be affected?

If the Bill stays in its current form, hundreds of thousands of women will have to postpone their retirement. 500,000 women will have to wait for more than a year longer before receiving the state pension (mostly women aged between 56 and 57). 300,000 women born between December 6 1953 and and October 5 1954 will have to wait an extra 18 months to be entitled to state pensions.

The worst affected is a group of 33,000 women born between March 6 1954 and April 5 1954 who were previously due to retire at the age of 64. Under the government’s revised timetable, these women will have to wait a full two years longer before they reach the new SPA. They are set to lose at least £10,000 in state pension, and have less than seven years to plan for this loss in income. Such women, who may have worked part-time, are already suffering a pensions disadvantage because for many years, part-time workers were not allowed to pay into a pension scheme. Similarly, many women born in the early 1950s have huge holes in their pension pots as a result of lengthy spells off work raising their families.

What is the government’s position?

The government came under pressure this week from MPs from all parties to modify its plans. In spite of this opposition, the government’s bill was voted through its second reading. However, Iain Duncan Smith, pensions secretary, pledged to consider ways to ease the transition for the worst affected.

What did he say?

Mr Duncan Smith said was aware of the concerns about a “relatively small” number of women, and that he was “willing to work to get the transition right”. “I will quite happily discuss transitional announcements with anyone who wants to do so,” he said. “I do not rule out discussions, but we plan to press ahead with the dates that I set out at the beginning of the process.”

What are the possible transitional arrangements?

Nothing solid was set out in Parliament this week but a number of options have been previously put to government, including making an exemption for seriously ill women to be excluded from the faster rise in SPA.

Saga, financial advisers to the over-50s, has suggested a compromise which would allow those affected to claim pension credit on the old state pension age timetable.

“This would mean, for example, that a woman born in April 1954 who would not be eligible for state pension until she reached age 66 under the Pensions Bill changes could still be allowed to claim means-tested pension credit at age 64 if she had little other income,” says Ros Altmann, director-general of the Saga Group.

“This would ensure that the poorest women did not lose out completely by having to wait longer for their state pension. It could also help the poorest men who would have to be permitted to claim pension credit at the same age as women”.

What if I am affected by the changes?

You are still in limbo and waiting for the outcome of the government’s listening exercise. The Bill moves to the Committee stage in early July but the report stage will not be until the autumn. But Altmann suggests that everyone affected writes to her MP in the meantime, to make sure that they are aware of the consequences of the Bill.


Listen to Alice Ross interviewing Ros Altmann on women’s pensions here: http://podcast.ft.com/index.php?pid=1218

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