Women born in the 1950s would be able to access their state pension early if Labour were in power, shadow work and pensions secretary Debbie Abrahams is set to announce at the party’s conference this week.
In a move designed to meet some of the demands of the Women Against State Pension Age (Waspi) campaign, Abrahams is reported to be planning to announce a policy that would see women born in the 1950s entitled to access a reduced state pension two years early at the age of 64.
Labour says the policy is cost neutral in the long run, but pension industry figures have attacked the practicality of the proposal saying most women affected by accelerated state pension age increases will already have reached state pension age by the time it would take to get new rules through the legislative process.
Royal London director of policy Steve Webb, who was pension minister when the Pension Act 2011 accelerated the timetable for increases for Waspi women, has also suggested that the proposal could fall foul of sex equality legislation and could leave those taking a lower pension below the poverty line for the rest of their lives.
Webb says: “Writing new primary legislation, getting it through Parliament, and implementing the change on the ground is likely to take at least two years. If this legislation completed its passage through Parliament during the 2018/19 session, it would take at least another year to change government computer systems and to communicate effectively to all those who might be affected. By the time the new law could be implemented, most of the women who had the shortest notice of state pension age changes would already be drawing a state pension.
“Under equalities legislation it is unlikely that this new option could be made available only to women. In addition, there are serious practical problems with allowing people to opt for an early pension which is permanently paid at a lower level than the full state pension. For example, if the scheme is to be cost neutral, they would not be allowed to claim pension credit or other benefits to top up their low income. But if they could not do so then they could be living permanently below the poverty line throughout their retirement.”
Hargreaves Lansdown senior pension analyst Nathan Long says: “The Government’s attempts to retain a meaningful State Pension by pushing up the age of entitlement is necessary but have been clumsily communicated. Labour’s pledge to allow some early access will be welcome for the group of women whose retirement plans were changed at rather short notice. Scrutiny of the detail to understand any associated costs is imperative given the current Government’s continued view that the cost of a u-turn would be simply too great. As time is running to provide any meaningful change, it begs the question as to whether any compensation would be retrospective should Labour gain power.”
Barnett Waddingham senior consultant Malcolm McLean says: “This seems similar to a suggestion made by the Work and Pensions Select Committee last year. That was firmly rejected by Waspi and is presumably still viewed as falling well short of their demand for interim payments for all the women affected back to age 60.
“In any event by the time Labour comes to power, if or when they do, most of the ‘50s women’ will have reached their state pension age under the existing rules and would be unlikely to benefit from this early retirement option.
“There are other potential problems likely to surface from the proposal. Not least complaints of inequality of treatment for men or indeed other women born, for example, in the 60s and therefore ineligible to benefit from the scheme.
“I cannot see Labour’s plans as a solution to the WASPI problem and therefore ever likely to get off the ground.”
AJ Bell senior analyst Tom Selby says: ““If the Conservatives cling to power for the next few years and remain steadfast in rejecting calls to help these women then for many this will be too little, too late.
“That said – and we still await precise details on Labour’s state pension age policy – there is merit in exploring options to make the state pension more flexible. Indeed, there is no obvious reason such a reform should be restricted to a specific cohort of women provided it is done on a cost neutral basis. Such reform would tally with the pension freedoms and could be particularly helpful to those in physically demanding jobs.”
- Former Chancellor Ken Clarke announced the state pension age (SPA) of women and men would equalise at 65. The change would be phased in over ten years from 2010
- Pensions Act 1995 formalised the proposals
- Pensions Act 2011 accelerated the proposed timetable, starting in April 2016 when women’s SPA was 63 so that it will now reach 65 in November 2018. The equalised SPA would then rise to 66 by October 2020
- The Government subsequently amended the timetable due to the short notice of significant increases given to some women. This limited the maximum increase under the Act at 18 months, costing the Exchequer £1.1billion
- In a March 2015 report on Communication of State Pension age changes, the Work and Pensions Select Committee concluded that “more could and should have been done” to communicate the changes and called on the Government to “explore the option of permitting a defined group of women who have been affected by state pension age changes to take early retirement, from a specified age, on an “actuarially neutral basis”