Rushed women’s pensions plans penalise the poor

The coalition’s plans for the extra rise in Women’s State Pension Age goes too far and too fast, according to the speakers at the Fabian Women’s Pensions event.

Speaking to an audience of about 50 people in the House of Commons, Baroness Hollis of Heigham, the Shadow Pensions Minister Rachel Reeves, Margaret Creear of Age UK and the Pensions Minister Steve Webb spoke of their concern for the most vulnerable women.

Margaret Creear from Age UK read out the real-life reactions of 57-year-old women on learning they have to wait two years extra for their state pension with as little as six years’ time to prepare for the delay. These women, through no fault of their own, bear the worst brunt of the coalition’s short-notice plan to speed up the rise in women’s state pension age to 65 from 2016 and to 66 from 2018.

The women face a loss of £10,000 in state pension income over two years – up to £15,000 if they could have been on Pension Credit. They will have no time to build up alternative pension provision and could have to draw on modest rainy day savings to survive. Women in manual jobs or in the low-earning work women often find themselves in after taking time out to care of children or relatives have no prospect of replacement pension savings.

This is the last generation of women to leave school at 15, many have worked all their lives and are incomprehensible that Government can now move the retirement goalposts at such short notice. Women, particularly in poorer socio-economic groups often develop heath conditions in their fifties – breast cancer, osteoporosis, diabetes, high blood pressure – which make continuing work in manual jobs hard and uncomfortable. Nearly a third are family carers, many are struggling to pay bills at the present time and most have faced inequality all their lives.

They won’t have the safety net of claiming Pension Credit as the entry age rises in line with women’s State Pension Age. They will instead face serious hardship as a result of the coalition’s hasty effort to reduce the deficit at the expense of the poorest women.

The changes, which are in breach of the Coalition Agreement of 2010, mean that no man will see his pension age rise more than a year earlier than agreed in the 2007 Pensions Act but half a million women will have to wait more than a year extra for theirs, 300,000 women will have to wait 18 months more and 33,000 women will see their pension age rise by two years.

As a result of increasing life expectancy, there was a consensus as far back as the time of the 1995 Pensions Act that retirement ages needed to rise, commencing with a gradual increase from 60 to 65 for women between 2010 and 2020. With at least 15 years’ notice, women had time to plan. This latest rise gives some women just six years’ notice. There is less awareness of the change among lower paid women and women told Age UK they believed that government should have done more to warn them either by writing to them all individually or advertising on TV.

Labour Front Bench position, in contrast, is there should be no further changes in State Pension Age until 2020, and that SPA should rise to 66 for all from 2020-22 which is fairer as no woman has to wait for over a year extra. This is still earlier than the Pension Act 2007 changes which would have seen the rise to 66 completed by 2026. Many Lib Dems (and Conservatives) have supported this approach by signing an early day motion, tabled earlier this year, on the pension age for women [http://www.parliament.uk/edm/2010-11/1402]

Steve Webb, the Pensions Minister, has long been a committed campaigner on women’s pensions and helped women claim £83 million extra in state pension by asking Government to cross-check women’s National Insurance records for entitlement to National Insurance. He backs the vision of a new Universal Pension combining State Pension and Pension Credit which Baroness Hollis called for last year and he is committed to pressing for this at a level about the Pension Credit Gurarantee, which would bring £140 a week to each adult who had paid National Insurance for 30 years. It would make saving for retirement pay for women as it would lift them above means-testing.

At the event, Rachel Reeves asked the Pensions Minister to take Age UK’s evidence back to the Government with a view to mitigation of the impact of the accelerated change. See more on her website here: [http://www.rachelreeves.net/blogs/index.php/2011/06/20/title-32?blog=9]

Lifestyles are still gendered and women are on a different rollercoaster from men as caring responsibilities continue and but are still not equally shared. This was Patricia Hollis’s message – with state pensions originally linked to waged work and not work in the home, women’s access to pensions was often through a spouse. This state of affairs started to change when Labour Minister Barbara Castle introduced Home Responsibilities Protection in the 1970’s. The last Labour Government’s 30 year rule and help for carers and grandparental carers increased opportunity for women to build up state pension in their own right. With Labour’s changes, which Baroness Hollis and the Fabian Women’s Network campaigned for, 75 per cent of women retired on a full Basic State Pension in 2010, up from 30 per cent before – this will increase to 90 per cent of women by 2025. Labour’s Pension Credit also created a generous safety net so that today’s pensioners are no more likely to be poor than the rest of the population.

Baroness Hollis said that the coalition government which will implement Labour’s new plan for a company pension scheme for everyone, the National Employment Savings Trust (NESTS) in 2012, needs to include more people on lower earnings in auto-enrolment as the entry level for inclusion is now nearly £8,000 which will exclude many women. Women also need to have early access to savings in pensions scheme as the pattern of women’s lives are less predictable than men’s.

Pension plans scrutiny in detail: what did the speakers say?

Steve Webb, Liberal Democrat Pensions Minister

Pensions would now be substantially more worth having, Steve Webb argued.

Defending the government’s policies, Liberal Democrat Pensions Minister Steve Webb hoped that the Green Paper on pensions would be welcomed.

He pointed out that while in opposition, he had campaigned to raise awareness that lots of women should have been getting pensions but had not received them. As of June 30, £83 million extra had been taken up by these women because of his efforts, he noted.

Stating that it was necessary to build on the 2010 changes, he noted that the consultation deadline for the proposed changes was 24 June, urging people who wanted to see a decent state pension submit proposals to it.

There were two options in the Green Paper, the MP said, focusing on the single tier state pensions proposal.

Mr Webb explained that everyone would be entitled to receive a basic £140 pension after 30 years of work, compared to the £97 a week previous figure plus the top-up from private pensions.

Arguing that the move was critical towards eliminating pensioner poverty, he felt that the overwhelming beneficiaries of the policy would be women, carers and mothers.

Women who cared for children before 2002 had missed out on the second part of the pension protection but the government would immediately put them on the same rate, the Minister affirmed.

A year running FTSE 100 would put a person on same pension level as someone who had spent a year of caring, he clarified.

It would be later than expected, but because of the increase, many people could get more money over the course of their lifetimes, he pointed out.

Acknowledging that the issue of notice was important, he stated that the male state pension age had not moved in a century. The money would have to come from somewhere and there was a bill that had to be paid, he said.

The MP noted that the proposals had been published in 2010 and would come into effect in 2018. He pointed out that this was about eight years notice, though accepted that this was less than ten. If this had not been done then the challenge was about where to find the money from, he commented.

Concluding, he argued that pensions would now be substantially more worth having.

All arguments about health would be true when the pension age was due to rise to 66 to 67 and to 68, he said, noting that these years had already been legislated for.

He explained that it necessary to address these issues as a society. The system needed to ensure that support was in place regardless, he argued.

Rachel Reeves, Shadow Pensions Minister

The government had gone back on its pledge not to raise the state pension age for women until 2020, Rachel Reeves stated.

Responding to the debate, Shadow Pensions Minister Rachel Reeves commented on the importance of the timing of the event, noting that the second reading of the Pensions Bill would be debated in the House of Commons next Monday.

Many people had written to her detailing their experiences and views on pensions, she said.

Detailing the case of one of her constituents, the MP revealed than a 57 year-old woman had based all of her plans on retiring, felt robbed by the government and had no option but to continue working, despite illnesses.

This group of women had seen the goalposts rise twice, she criticised.

Longevity may be true but it was not the case that women aged 56 and 57 were seeing their longevity rise faster than everyone else, she stated.

Ms Reeves expressed concerns that the government’s proposed accelerated equalisation would start in 2016, which was just five years notice. This was not enough time to prepare, she argued.

Quoting from the Coalition Agreement, she pointed out that the government had pledged that the retirement age would not rise to 66 for men before 2016 and for women before 2020. For women this would now come into effect in 2018, she stated.

4.9 million people would be affected by the changes, she continued.

Women aged 57 would have to wait an extra two years for their pensions and could lose out on up to £15,000, she said, stressing that this was unfair.

Drawing to a close, the Shadow Minister was hopeful that Mr Webb would be able to find a way forward to ensure that these women did not have to wait longer to claim their pensions, as had recently been requested of him by fellow Liberal Democrat MP Jo Swinson at DWP questions.

Stating that the changes had been widely opposed, she noted that 12,000 people had signed a Unison petition and 20,000 people had signed a Saga petition in protest of the accelerated rising of the pension age.

These were not the usual suspects who complained about everything the government had did, she stressed.

Seeing the need to raise the pension age, she urged the government not to hit that group of people.

Baroness Patricia Hollis

The government needed to smooth the issue of too far and too fast, the threshold for auto-enrolment was too high, the system needed to work for low paid self-employed workers, and access to savings was needed, Baroness Patricia Hollis argued.

Detailing the history of women’s pensions, Labour peer Baroness Patricia Hollis explained that women’s pensions derived from waged work at time where women’s work was largely in the home.

Increasing longevity and divorce rates meant that women had found that access to pensions via their husbands had declined, she said.

Yet, increased caring responsibilities meant that they could not sustain work full-time to provide for retirement, the Baroness noted.

Changes to pensions since the 1970s had brought women into the pensions system when they were not working, she added.

Baroness Hollis highlighted that around five years ago only 25 per cent of women were claiming the full state pension, as compared to over 90 per cent of men.

However, James Purnell had reduced the number of qualifying years for the pension to 30, for both men and women, she said. This meant that as many women as men would retire with full state pensions, she stressed.

Noting that pension credit had been introduced to ensure that the situation was reformed, she regretted that pensioners were still likely to be poor. This was because pensions were income related and making savings produced a perverse effect.

The government needed to unify the state pension, the state second pension and pension credit to adequate levels to tackle poverty whilst encouraging people to save, the peer declared.

Praising the Labour Party for having introduced auto-enrolment, she commented that this ensured that women earning £15,000 to £18,000 a year had almost as high an income in retirement than they had at work.

This was huge progress, but there were still some gaps, she felt, noting that this was mainly because of the distinction between men and women’s lifestyles.

She pointed out that women often dropped out of the labour market after they had had children or experienced divorced. Women’s lives had a different rollercoaster effect than men’s and this needed to be taken into account, she stated.

The Baroness concluded by making a few recommendations.

Firstly, she argued that with the pension age rising to 66, the government needed to smooth the issue of too far, too fast.

The threshold for auto-enrolment, which was around £7,800 a year, was too high, she felt.

Thirdly, she advised the government to make pensions suitable for low paid self-employed people such as carers, caterers, hairdressers and people working in the services industries. The pension system did not fit for them because they did not make employer contributions, she said.

Access to savings as well as pensions was needed, she stressed.

Margaret Creear, Age UK

Most people accepted that the state pension age should rise, but not twice for the same people with little notice, Margaret Creear argued.

Commenting on a campaign run by Age UK, Margaret Creear explained that her organisation had contacted 3,000 women, mostly through the internet and by the telephone, and found that they were desperate to the stop the changes going through.

Over 2,680 people had completed the online survey and a poll had been done of 500 women in their 50s, she said.

The main findings of the polling showed confusion about the state pension age as nearly a quarter of the 500 women thought that they would get the state pension at 60 rather than 63, she noted.

Most felt that the government should proactively inform them of changes to state pension age through national advertising rather than allowing them to find out through the media, she added.

She said that they also thought that ten years notice for changes to the state pension age was needed.

Detailing the results of the survey, Ms Creear highlighted that 30 per cent of the campaigners lived on less than £10,000 a year, and that many of them were struggling to cover their day-to-day expenses.

18 per cent of them earned £10,000 to £15,000 a year, 13 per cent of them earned more than £35,000 a year, 19 per cent of them had left work and 33 per cent of them worked more than 55 hours a week.

The unifying theme was that they had been responsible in planning financially as best they could in their circumstances, but that they would be faced with the consequence that they would lose a lot of savings if they could not work for longer, she continued.

Asserting that there had been a loss of faith in the pensions system, she commented that many respondents felt that an unjust burden had been placed on them, and that a fifth of those surveyed felt real anger about the current situation.

Most people accepted that the state pension age should rise, but not twice for the same people with little notice, she argued.

Ms Creear highlighted that many people were ill during their 50s and 60s and did not buy the fact that they themselves would live much longer. Indeed, the survey revealed that 43 per cent of the women asked had ill heath, such as high blood pressure, diabetes, breast cancer and exhaustion, she said.

These people had a very long working life and saw their pensions as an entitlement that the government was refusing to cough up, she proclaimed.

Continuing, she regretted that people who relied on state pensions had often faced inequalities their whole lives. Many had debts, whilst others were afraid to use their savings, she noted.

Drawing to a close, she pointed out that women often had caring responsibilities when the got older. Society relied on women for caring especially as the care system was underfunded and was in crisis, she said.

Commenting that many women wanted to give back to society in their retirement, she regretted that many of them felt that this would be hard to do.

There had always been unfairness in the system but this did not make it right, Ms Creear declared.

She argued that something needed to be done to protect people who were the most disadvantaged, and urged the government not to increase the pension age to 66 before 2020.

The cost in reduction on pensions needed to be spread more fairly than the proposals in Parliament allowed for, she concluded.

Questions from the audience

1. The panel was asked how the government should let people know about the changes to the state pension.

In reply, Ms Creear suggested that DWP should write to people informing them of any changes. 55 per cent of people she surveyed expected this of the government, while 37 per cent said that a national advertising campaign would catch their attention, she noted.

Free advice was available on the DWP website and from the Pensions Advisory Service, highlighted Baroness Hollis, though said that this was fine if people knew where to go. She agreed that the government should inform people of the changes in writing.

2. The panel was asked whether the issue of women’s pensions would become less relevant as equality increased.

To some degree, replied Baroness Hollis. However, she stressed that women often had jobs that fit into school hours. Until men took on, by choice, a joint responsibility for childcare with women then the roles would remain relatively gendered, she argued.

3. The panel was asked to respond to suggestions that the type of participation that women had in the labour market was as important as the level.

Women affected by the changes would stay on lower level benefits for longer and would use up more of their savings, said Baroness Hollis.

Ms Creear pointed out that these women had the narrowest shoulders, and felt that the changes could undermine their health. Although the state pension age was going up, people still had to claim it in the first place, she commented.

However, Mr Webb stressed that even if the pension age rose to 68, the 57 year-old carers would still be 57 year-old carers.

Many women had prepared their plans based on a retirement age of X and it was quite late in the day to roll back those plans, replied Ms Reeves.

4. Baroness Hollis questioned whether 62 year-old women who were unable to work because of health would be expected to go onto JSA or income support.

Responding, Mr Webb said that they would be able to apply for ESA. The top rate of the ESA was not that far short of the £97 basic pension level, he noted.

The Baroness suggested that an age related premium could be introduced to smooth the gap between ESA and pensions.

5. The panel was asked to reply to a suggestion that life expectancy could be linked to the state pension age if people had particularly life-threatening illness.

In reply, Mr Webb commented that if the government identified a narrow group of sick people then excluded groups would come forward and would demand that other illnesses should also be included in the band. This risked introducing complexities into the system, he felt.

6. Labour MP Sheila Gilmore raised concerns that women who had saved £16,000 for their retirement would lose out on means tested benefits. She regretted that Barbara Castle’s plans had not been implemented.

The ESA had capital limits of £16,000, Mr Webb replied. He said that once people had less than £15,999 then they would be able to claim the benefit.

Anyone heading for a pension level higher than £140 would get the higher figure, he added.

Baroness Hollis felt that the government’s changes to pensions would be a trap for people ten years down the line who wanted to start saving for their retirement.

Disclaimer: statistics and figures should be checked against source.