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Pensions Changes – A brief history…

Posted: 9th Feb 2016 by Nick Lawson Pensions

A brief history of the debate to date…….

The government wants to make the state pension age 65 for men and women by 2018, and keep raising it after that. It means that some women who were preparing to retire in the next few years will have to wait longer.

The campaign group Women Against State Pension Inequality is asking the government to put all women born after 6th April 1951 “back in the same financial position they would have been in had they been born on or before 5th April 1950”.

Their petition to challenge the government now has the 100,000 signatures it needs to force parliament to examine the matter.

The pensions minister Baroness Ros Altmann told BBC Breakfast the Women Against State Pension Inequality’s campaign is “misleading” and “prolonging an inequality” in their demands for compensation for the women affected.

Changes were made in the 1995 Pensions Act

Since 2010 women’s state pension age has been rising from 60 to 65 to equalise with men but the plan has been in place much longer, with rises set out in the 1995 Pension Act.

However, many women say they were not properly informed of the changes, many of whom now find their state pension age to be 66 thanks to measures to equalise women’s state pension age with men’s and general rises in the age at which the government provides a pension.

Hundreds of thousands of women born in the 1950s have seen their state pension age increase, some by as much as six years.

Pensions minister Ros Altmann (pictured above) has come under fire recently over ‘betraying’ women facing the sharp rises to the state pension age, after she campaigned for the reforms to be changed in her previous role as director general of Saga.

She has publicly defended herself over the matter, insisting she had no government power when the relevant laws were passed to reverse the changes.

The government has used ‘smoke and mirrors’ to disguise the drawbacks of pension reform, according to the new shadow pensions minister Angela Rayner.

Speaking to New Model Adviser® Rayner said the government had communicated badly changes to the state pension and had not been honest about those who would lose out.

Her comments follow those from MPs on the Work and Pensions Committee which hit out the government for ‘bungling’ its communication around changes to the state pension age (SPA) for women and the incoming flat rate state pension.

‘A lot of people feel that they have been mis-communicated to about what pensions mean,’ she said. ‘This government has been playing smoke and mirrors and trying to complicate matters further and I don’t think that helps anybody, we’ve got to be honest.’

She said chancellor George Osborne spoke about the positives of pension changes but was not ‘honest’ enough about those who lost out.

‘I don’t think the current situation is honest enough to people,’ she said. ‘We’re telling people about what the good things are, but actually if the chancellor talks about not increasing the amount of money it costs, then somebody’s got to lose. We’ve got to be honest with people about that.’

The government has launched a campaign in an effort to clear up public confusion over the new state pension.

Changes to the State Pension from April 2017

Effective from April next year, the new state pension will see a move from the current ‘two-tier’ system, which is made up of ‘basic’ and ‘additional’ rates. From next year the system will move to a ‘single-tier’ flat rate pension of no less than £151.25.

Pension minister Ros Altmann has launched a drive to explain the changes under the tagline ‘our state pension is changing’.

New Model Adviser® revealed in July that Altmann would be launching the campaign, though details were sparse at the time.

The campaign features advertisements specifically aimed at people within 10 years of reaching their state pension age, a group which also has access to the new pension freedom initiative launched in April.

The government said that many people within this group may be basing their financial decisions on the likely state pension amount they will receive.

The news comes as the government has come under fire over eligibility for the new system.

In July it was revealed that just one in three will receive the full flat-rate state pension, 100,000 fewer than expected according to government figures.

That news drew fire from the Labour party, who accused the government of an ‘unacceptable’ failure in transparency with people over their state pension entitlement.

Altmann admitted that the job of explaining the new state pension ‘hasn’t been done well enough,’ but said that one of her first actions as minister had been to identify the problem.

‘Huge efforts have been put into reforming the mind-blowingly complicated state pension system that exists today into something that, over time, will be clearer and fairer for everybody,’ she said.

‘But the job of explaining to people how the reforms will affect them hasn’t been done well enough.’

‘People need to understand, so they can make the right decisions about saving and preparing for later life. One of my first actions on becoming pensions minister was to identify this priority, and I’m very pleased to now be launching this major campaign.’

Pension minister Ros Altmann has said the government will not compensate women who have been hit doubly by state pension age rises.




Austerity bites

As a campaigner, Altmann successfully secured a government concession to ensure the maximum increase to women’s state pension age was 18 months. It meant a six-month delay to plans and cost the government £1 billion pounds. It was no small victory.

Now Altmann is a minister, she has greater powers, but in this age of austerity it is unlikely she would be able to take on chancellor George Osborne by arguing for more costly concessions.

Moreover, having thrown down the gauntlet to her, Waspi missed a significant admission from former pensions minister Steve Webb, who told the work and pensions committee of MPs it was ‘abundantly clear there are a bunch of savers who didn’t know [about the age rises]’.

‘Did we miss some people? Probably. When someone says “I never got a letter”, they’re probably telling the truth, I don’t dispute that,’ he said.

Changes to the state pensions will affect men as well as women

However, Waspi is missing an even bigger point that changes to the state pension will not affect only women.

Department for Work and Pensions modelling shows that between 2016 and 2020 the notional median weekly income increase for more than 60% of women will be £8 in the first year, which would increase to £9 between 2021 to 2025, and then to £10 between 2026 and 2030.

Between 2016 and 2020 however, just over 50% of men will receive only £6 more. From 2021 to 2025 just over half will receive £10 more. But from 2026 to 2030 fewer than 50% will receive £11 more, with the majority receiving £11 less per week.

If Waspi is against inequality, why is it not decrying the negative impact of this change on men too?

The Work and Pensions Select Committee said the incoming new state pension had been widely misunderstood and that the DWP had not provided people with the information they needed.

In April 2016 a flat-rate state pension will replace the existing two-tier system. In his Autumn Statement speech chancellor George Osborne announced the new single-tier system will pay a minimum of £155.65 a week.

However, as many as one in three retirees will not receive the full flat rate as they will not have made sufficient national insurance contributions. Women in particular are badly affected by this, many having left employment for long periods of time.

This has led to widespread criticism of the government for its failure to properly communicate the changes.

The Work and Pensions Select Committee has called for the statements to be written in more simple language to make them easier to understand. It also wants the statements to be clearer about how much an individual will receive and from what age.

The committee has called in particular for improvements to communication for women approaching state pension age, many of whom have been affected by changes to their state pension age.

The government will have to justify state pension age (SPA) rises for women after a campaign group secured a landmark parliamentary debate on the subject.

The debate, which will be held in the House of Commons on 1 February, comes after a vocal campaign by the group Women Against State Pension Inequality (Waspi) which was set up to protest changes in the age at which women will receive their state pension.

The 1995 Pensions Act first set out incremental women’s SPA rises from 60 to 65 to equalise with men’s. The Pensions Act 2007 raised the pension age for both women and men from 65 to 68 between 2024 and 2046.

The 2011 Pensions Act then accelerated the timetable so women’s SPA would hit 65 by 2018 and both men and women would have a retirement age of 66 by 2020. It meant some women would have to wait an extra two years to receive their state pension, later capped at 18 months at a cost of £1 billion.

The issue has already been the subject of a Westminster Hall debate in parliament in December, but reached the House of Commons after Scottish National Party (SNP) MP for Paisley and Renfrewshire South Mhairi Black secured a further debate.

That took place last week and saw cross bench support for ‘transitional measures’ to compensate those affected by the changes. MPs voted in favour of Black’s motion to implement transitional measures to help affected women, by 158 to zero.

The issue is now set to be debated again in the House of Commons after a Waspi petition protesting against the changes surpassed the 100,000 signatures needed to be considered. Black’s constituency office confirmed a debate on the Waspi petition would take place on 1 February.

Helen Jones MP, chair of the petitions committee, will lead the debate.

No ground given

The government has repeatedly blocked pressure to provide compensation to those affected, with Department for Work and Pensions (DWP) parliamentary undersecretary of state Shailesh Vara saying at the SNP-led commons debate last week that the matter had been debated ‘thoroughly’ in 2011.

‘This matter was debated very thoroughly in 2011, and a concession was made then worth over £1 billion. It was thoroughly debated in both houses of parliament and I very much hope that I have put on record the position of the government,’ he said.

Following the Westminster Hall debate in December, the DWP issued the following statement: ‘The policy decision to increase women’s SPA is designed to remove the inequality between men and women. The cost of prolonging this inequality would be several billions of pounds. Parliament extensively debated the issue and listened to all arguments both for and against the acceleration of the timetable to remove this inequality. The decision was approved by parliament in 2011 and there is no new evidence to consider.’

The 2011 Pensions Act then accelerated the timetable so women’s SPA would hit 65 by 2018 and both men and women would have a retirement age of 66 by 2020, meaning some women would have to wait an extra 18 months to receive their state pension.

Women born between 6 April 1950 and 5 April 1953 still have a SPA set by the 1995 Pensions Act of between 60 and 63 because they reach SPA before the introduction of the new state pension.

An online petition protesting against these changes was started by the Women Against State Pension Inequality (Waspi) campaign.

It is calling for all women born on or after 6 April 1951 affected by the changes to the state pension age to be ‘put in exactly the same financial position they would have been’ in if they had been born on or before 5 April 1950.

Contact us

If you would like to discuss your pension concerns, please contact Nick Lawson or call 01904 655202.