The increase in State Pension Age to 66: Are the Government’s transitional arrangements really such a concession?
The Government tabled an amendment to the Pensions Bill yesterday to be debated next week which will cap the maximum increase in women’s State Pension Age (SPA) to 66 at 18 months. While an admission by the Government that it got its plans wrong as the original plan would have seen some women’s SPA rise by two years, their changed plans are short shrift given the short notice hundreds of thousands of men and women have had for the increase in SPA.
The Government’s amendment means that the 33,000 women who would have worked two years longer than they expected to receive their Basic State Pension will no longer have to do so. However there will still be many thousands of women who will work up to 18 months longer than they originally expected to receive their Basic State Pension. In making this change to women’s SPA the Government has broken the Coalition Agreement.
The Pensions Bill brings forward the increase in the SPA to 66 by six years. The Pensions Act 2007 originally set out that it would increase to 66 between 2024 and 2026. Both women and men are affected by the bringing forward of the SPA, but it particularly affects women aged 56 and 57. Furthermore, in September, the Pensions Minister announced that the increase in the SPA to 67 and 68 will be brought forward.
There are two stages for increasing the SPA set out in the Bill. Firstly, equalisation of the increase of the SPA between men and women will be accelerated from April 2016, so that women’s SPA reaches 65 by November 2018. This will be followed from December 2018 by the increase in the SPA from 65, reaching 66 by April 2020. The Government amendment changes this so that men and women reach 66 by October 2020.
DWP analysis shows that the increase in the State Pension Age falls disproportionately on women, disabled people and possibly on certain ethnic groups.
Increasing the SPA affects people on lower incomes more because they have a shorter life expectancy and they therefore lose a greater proportion of their state pension payments. Better off pensioners will have other pension resources and other assets. An increase in SPA will therefore have little impact on their retirement age.
Furthermore, people on lower incomes are more likely to have health issues or to have physically demanding jobs that make it harder for them to work longer. And they are often totally dependent on state pensions, particularly women. The 2011 Scottish Widows’ survey of pension provision found that only 51 per cent of women in 2011 are making enough provision for their retirement.
And Age UK’s recent survey of women aged 50 to 57 found that 23 per cent of women could not work longer because of health problems, 15 per cent were counting on having more time in retirement for their caring responsibilities and 8 per cent were unemployed with little chance of finding a job.
However we welcome another Government amendment to the Bill which provides greater powers to cap pension scheme charges for deferred members, thereby enabling the Government to protect all scheme members from high charges, not just active members.
This goes some way to addressing the matter of active member discounts, or what consumer groups and unions term ‘deferred member penalties’, where scheme members are charged more on leaving an employer. We are also aware of some employers requiring leavers to transfer out of their pension. While this is welcome move by the Government and indicates Ministers are listening to concerns we would like the Government to act now rather than to keep it as a reserve power should they wish to use it in the future.