Women hit hardest by state pension changes

5 May 2011
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2011 has been the year of pension changes. The UK's creaking pensions landscape is - without exaggeration - entering a period of unprecedented upheaval, with another Pensions Bill navigating its way through Parliament; the abolition of the default retirement age; and, most recently, Lord Hutton's report on public sector pensions.

However, one of the changes that has caused the most uproar is the government's decision to accelerate the increase in the state pension age to 66 by 2020. While seemingly sensible, in practice this proposal discriminates against a particular group of women - and runs directly against the Coalition Agreement, which promised that women's state pension age would not rise beyond 65 before 2020.

So who exactly is affected?

Those women born between 1953 and 1955 (now aged between 55 and 58) will bear most of the brunt. Not only have they already seen their pension age increase from 60 to around 63 or 64 in the 1995 Pensions Act, they are now supposed to accept another increase in pension age, beginning in 2016. 

While they quietly accepted the initial increase in 1995, and set about planning their finances in preparation for receiving their state pension at the new higher age, this latest decision to increase the age to 66 has proven to be the tipping point for many.  

This is because it's the second time women have been hit - and not just by a further year. For many, it will mean up to another two years' delay. And also because the government is giving them very little time to realistically make up for the loss of thousands of pounds of state pension income they were relying on.

Indeed, with the pension age already quite close, many of these women have already retired to care for relatives and now find that their financial plans are in tatters.   

Disadvantage

It's important to remember that women are already at a pension disadvantage relative to men. This is especially the case with this generation of women, who earned far less during their working lives, were often barred from joining private pension schemes when they started working, and often had their careers interrupted to raise children.

Most are currently not earning enough to be able to save the thousands of pounds necessary to replace the state pension that is being taken away from them.

There are fairer and more sensible ways the government could have chosen. Ideally, it would be best to delay the increase in women's pension age until 2020, and then allow men's and women's pension ages to rise in tandem to 66 over the next year. This would allow more time to prepare, affect fewer people and not interfere with the existing timetable of pension age changes.

Alternatively, the government could limit rises to no more than one extra year within 10 years of the expected pension date, or at the very least it could leave Pension Credit eligibility at the existing women's state pension age to help the poorest women - and men - negotiate the change. 

It's also important to remember that this will affect not just the 35% of women who are single when they retire and often wholly reliant on the state pension, but entire families, who will be forced to find ways to make up for the government's determination to wring additional savings from our already strained pensions system. 

I've been inundated with angry, desperate letters and emails from affected women, and sincerely hope the government will rethink its unfair timetable. We have sufficient notice of such significant changes - fairness surely demands it.

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