'Government has spent billions on coronavirus, why can't it pay our state pensions?'

22 June 2020

Moneywise readers are unhappy that the Government can find money for furloughed workers but will not pay state pensions for women born in the 1950s

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Women affected by negative changes to their state pension are questioning why the Government can find £337 billion to fight coronavirus but not to help them in their retirement.

In 1995 the Government announced plans to increase the female state pension age from 60 to 65 to bring it in line with men.

In 2011, it then decided to accelerate its plan to increase the state pension so that men and women were on an equal footing by 2018. Women who thought they would receive a state pension at 60 suddenly found out they had to wait until 66, and many face financial hardship. For more on the issue, read our piece on the changes.

One woman, who wishes to remain anonymous, told Moneywise it is “extremely unfair” that women born in the 1950s are having to wait longer to receive their state pensions.

She says: “The Government does not mind splashing out billions of taxpayers’ money on the ridiculous furlough scheme.

“Some people are claiming furlough and working elsewhere, but the Government still pays them.

“Most of us can barely get by and in my case my partner has to help to pay the bills.

“Every day I think of how much better life would be with my state pension in the bank and not lent to some other Government plan.”

The furlough scheme has proved to be a lifeline for workers and companies hit by the pandemic.

It has so far covered the wages of nine million workers in the UK at a cost of £19.6 billion.

Another reader, Denise Taylor, told Moneywise she has to wait an extra six years for her state pension.

She says: “I have bad health after breast cancer. I have to live on my savings and my husband has to keep me. I have 51 credits on my forecast but will still not get the full pension at 66 due to not being well enough to work the last few years. We all worked from 15 years of age. We have all been discriminated against.”

Will the triple lock be scrapped?

To make matters worse, there are also fears the state pension triple lock could be scrapped because of furlough.

Under the state pension triple lock, the UK basic and new state pension increases by either 2.5%, average wage growth or by prices growth as measured by the consumer price index – whichever is highest. This process is known as uprating.

It was introduced in 2011 to ensure that the average pensioner's household income rose each year regardless of their financial situation.

Chancellor Rishi Sunak is said to be considering ditching the triple lock as the guarantee could become unaffordable next year due to swings in wages caused by the furlough scheme.

With millions of furloughed workers only receiving 80% of their wages, average earnings are expected to temporarily drop this year.

When they go up to 100% next year average earnings will see a huge rise, with the Office for Budget Responsibility saying they will go up by 18%.

Officials are concerned that if wages soar next year the Government will have to fund a corresponding sharp rise in the state pension as a result of the triple lock.

The Government has said it has no plans to break its manifesto pledge to keep the triple lock, but it has not ruled out a temporary suspension of the policy.

The Government said in a statement: “Announcements on tax and pensions policy are for Budgets. The Government is committed to supporting pensioners.”

Andrew Tully, technical director at Canada Life, says: "As the costs of helping the economy deal with the impact of covid-19 spiral, the Government will need to look at various measures to cut spending and increase taxes.

"It’s unclear at this stage if Rishi Sunak is proposing a long-term change to the triple lock, or simply a change for the next year or two, due to the fact the calculation basis for the earnings part of the triple lock could result in a significant increase." 

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