There are a range of changes to the state pension which affect women born in the 1950s; depending on their circumstances, some women will be included in the single tier pension and others will not. This briefing looks specifically at the impact of measures to equalise the state pension age.
- Legislation to equalise the state pension age at 65 by 2020 was agreed in 1995.
- The 2011 Pensions Act speeded up the equalisation process and increased state pension age to 66 by 2020 for both men and women.
- More recent legislation has raised the state pension age to 67 by 2028.
- The Single-Tier flat rate state pension will replace the current basic and additional pensions for people reaching state pension age on or after 6th April 2016. It will be introduced at the rate of £155.65 per week.
Equalisation of state pension age
Following the Pensions Act 2011 women’s state pension age will reach 65 by November 2018 and then state pension age for both men and women will increase to 66 by October 2020. The 2014 Pensions Act increases state pension age from 66 to 67 between April 2026 and 2028. It also sets up reviews of state pension age to be carried out about every five years with the first one to be published in 2017.
The reviews will be informed by analysis from the Government Actuary’s Department and by the views of an independently led body that is expected to take into account factors such as the variation in life expectancy, trends in healthy life expectancy and labour market factors.
Age UK recognises that as life expectancy increases it is reasonable to consider extending working lives. However we believe it is very important to consider a range of factors such as the differences in healthy life expectancy between different groups, and varying employment opportunities for continued working in later life.
Age UK is concerned about the impact of longer working lives for people in poor health, particularly given the considerable health inequalities across the country. It is vital that when making changes to the state pension age, proper provision is made for those who aren’t able to work due to ill health or are caring for family members and the thousands of people who struggle to find employment in later life. There needs to be greater clarity about the review and any subsequent uprating process.
It is also essential that people have sufficient notice of any changes in state pension age in order to make or revise their plans for retirement. Any changes to state pension age must provide people with at least 10 years notice.
Communication of pension changes
It is one thing for Parliament to pass a law and another for people to be aware of it and there are many women who throughout their working life expected to receive their state pension age at 60 and were shocked to find out when they were approaching that age that the rules had changed. While the DWP has written to women affected this did not start to happen until more than a decade after the 1995 changes and some women say they did not
receive a letter. It is vitally important that people are given enough notice about any changes to the state pension so they can properly plan and save for their retirement.
It is worrying and disappointing that so many women have had sharp increases in their State Pension age with little time to plan. The Department for Work and Pensions needs to do more to ensure messages about changes to the state pension are heard loud and clear by the people affected.
Pensions changes are not confined to the state pension. Inadequate levels of private pension saving could also affect women’s future financial security and make access to the State Pension even more important. Research conducted by the Pensions Policy Institute, with Age UK, shows that a third of women in work are ineligible for automatic enrolment into a workplace pension, leaving many at risk of not having a decent income in later life. This compares with 16 per cent of male employees.
The research highlights that just under a quarter (23 per cent) of all employees do not meet the qualifying criteria and of these 57 per cent are ineligible because they earn less than £10,000 a year. This illustrates not only the problems faced by many women workers but also disabled workers, ethnic minorities, recipients of Carer’s Allowance, those with more than one part time job and people who work in the service industry.
These figures, however, only include people who are employees, and there are many more who do not qualify because they are self-employed or not in work. Of the total population aged 16-64 about half qualify for automatic enrolment.
The recent Scottish Widows Women and Pensions Report 2015 also finds a persistent gender gap in pensions, with 52 per cent of women saving adequately, and with women’s average monthly savings standing at £105 compared to £177 for their male peers.
Age UK believes that it is important to look across the state and private pensions landscape to consider the overall impact of changes on groups that have traditionally been under-pensioned, such as women. There should be an urgent review of the equality impact of pension changes.
If you have any questions or would like future information please contact Angela Kitching, Head of Public Affairs, at firstname.lastname@example.org