Still time for Government to adjust its plans for state pension age changes

by Dr. Ros Altmann

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Pensions Bill Second Reading – we don’t need a U-turn, Government just needs to take a better and fairer route along the same path

Government could face costs of legal challenge for compensation as the changes seem unfair in public law terms

Government could face costs of legal challenge for compensation as the changes seem unfair in public law terms

Tomorrow sees the Second Reading of the Pensions Bill in the Commons. This offers another chance for the Government to adopt a slightly different approach to its plans for increasing state pension age.

Backbench MPs from all parties have started to realise that these proposals are not quite right and need to be adjusted. There are better ways to achieve the Government’s aims.

For the past two weeks, backbenchers have challenged David Cameron on this issue at Prime Ministers Questions. The PMs answers do not stand up to scrutiny. He says we need to increase state pension age – that is true, but we have to give people fair notice. He says we have to put our pension system on a sustainable footing as life expectancy rises. Again, this is true, but can be achieved in a better way without the unfairness. He also says we have to deal with the deficit – once more that is right but the current proposals do not save any money in this Parliament anyway, so the rush is nothing to do with the deficit.

An alternative approach would be a win-win for everyone. By keeping the current equalisation timetable to 2020 and then moving more quickly to 66 by 2021, this would give everyone around ten years’ notice of the proposed increase in their state pension age. We could then move to 66 � more quickly than planned, by say 2024 or 2025. This would recognise longer life expectancy, give people fair notice, honour the Coalition Agreement and save even more money on pensions than the current plans would achieve.

I have prepared a detailed briefing for MPs, to help them understand the issues better and hope that we can move along the same path more fairly and appropriately. Ministers must listen to reason on this issue. The current plans are unfair and may, indeed, be illegal in public law terms, since they clearly do not give women adequate notice of the large changes in pension age that they face. A legal challenge to the fairness of these proposals is likely to be difficult for Government to defend and could end up costing the taxpayer significant sums in court fees and compensation for those affected. Let’s adopt a more practical approach now, before it’s too late.

-ENDS-

Saga Explains Why Government Plans To Increase State Pension Age Are Unfair – And Proposes Alternatives

Saga supports the Government’s intention to accelerate increases in state pension age, in recognition of the great news that people are living ever longer. Life expectancy is rising faster than anticipated by the 2005 Pensions Bill, and the costs of supporting an increasingly ageing population will clearly require adjustment in the age at which state pensions start to be paid in future. However, Saga believes people need fair notice of future changes, giving them reasonable time to prepare. The current proposals do not do this. Six years’ notice of up to a two year delay in pension age clearly does not provide time to make alternative arrangements.

However, Saga believes there are much better and fairer ways to deal with this issue and hopes the Government will take the opportunity to adjust its plans. This is not a ‘u’-turn, this is a better way of moving along the same road. Adjusting the plans to save more money, treat men and women the same and also keep the Coalition Agreement, would be a win-win alternative path. It would not be a new path, but an adjustment of the current plans.

Our favoured proposal would be for the Government to start increasing the state pension age more rapidly from 2020 onwards, perhaps to reach 66� by 2024 or 2025. (Holland has just decided its state pension age will move to 67 by 2025, so such moves are entirely possible). By leaving the current timetable in place, the unfairness and discrimination against the hundreds of thousands of women who would be hit by the current plans will disappear – from 2020 men and women will be treated the same.

Advantages of this alternative approach:

Save more money by 2025 than current proposals

Give fairer notice of around 10 years or more to allow people a chance to plan

Increase state pension age more quickly to control costs and adjust to longevity changes

Alternative proposal:

Men and women treated the same

Honour the Coalition Agreement promises

Saga has been inundated with letters and emails from women who are distraught and angry about the unfairness of the Coalition’s proposed changes to their state pension age. They have asked us to help explain to the Government why these proposals are unfair. These women cannot understand why they have been singled out to bear the brunt of long-term cost savings on state pensions. Saga does not understand this either.

These particular women, already in their late fifties, have insufficient time to make alternative plans to replace the many thousands of pounds in state pension they will lose.

We hope this briefing will be helpful for MPs when considering how to respond to constituents and participate in the forthcoming Pensions Bill debate.

Why Ministers’ reasons for going ahead with the changes are not acceptable:

1. Life expectancy is increasing so state pension age has to rise:

   Rising longevity 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 does mean that we need to increase state pension age beyond age 66, much more quickly than planned and this is a better solution to dealing with rising life expectancy, which can give fairer notice.

2. Pensions must be put on a sustainable long-term footing as 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, many are already out of the labour market and have made careful plans for their future, which are now in disarray. 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.

3. Government 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 perhaps until 2020. It is also certainly not any justification for increasing women’s pension age by up to two years, even more than that of men.

4. These women can go onto unemployment benefit if they are out of work

   For many of these women, this is not an option and, in any case, this will not replace two years of lost pension. Out of work benefits will last only six months and are far less than state pension. Having a small private pension will exclude many of these women from benefits and many would not want to claim anyway. They feel this is an insult.

Conclusions:

Saga believes the Government needs to rethink its plans for accelerating state pension age increases. The current proposals involve both gender and age discrimination. Worryingly, many of the women affected do not even know their pension age could change again, because there has not been enough publicity surrounding the changes. The particular women affected by the proposals, aged around 56 or 57, and men of similar age who would have needed Pension Credit, are shouldering a clearly disproportionate share of the cost savings on pensions that are needed to help improve the nation’s long-term financial health. The alternative proposals could help address the unfairness of the current plans.