After losing a High Court fight over state pension age changes, the government has several options to help those women hardest hit, says former pensions minister Baroness Ros Altmann.
In a landmark ruling yesterday (3 October), the High Court dismissed the claim brought on behalf of 3.6 million women whose state pension age has been increased sharply, often without their knowledge.
The judges ruled that the government was correcting a past inequality against men, rather than discriminating against women, and was entitled to change pension ages at short notice and without due warnings.
It may not be discrimination, but it has caused real hardship: it was always going to be difficult to prove that a policy intended to equalise men and women's pension age was discriminatory. But many of those affected are suffering real hardship because successive governments failed to properly inform women of the original 1995 Act changes, so they were expecting their state pension at age 60 and had inadequate chances to prepare. That is perhaps more like maladministration than discrimination.
Equalising pension age, does not deliver equal pensions: they may start their state pension at the same age, but this is far from pension equality as women generally have much worse pensions than men. Not only do older women have lower state pensions, those in their early 60's are estimated to have just a third of the private pension wealth of men.
Women lose out in pensions due to social norms and past disadvantage: social norms caused women to lose out in pensions throughout their lives. When they were younger, they were often excluded from occupational schemes, were paid less than men, and had to take time out for childcare. That meant that their lifetime incomes were lower than men's and the increase in divorce rates also means that women have lost a spouse's pension that they might previously have relied on.
State pensions are a state benefit, not a property right: the High Court concluded that the government can change state pension rules, with Parliamentary approval, just as it can change other National Insurance benefits. Adjustments to social policy and controlling benefit expenditure are valid policy decisions. Of course, with an ageing population, increasing longevity and pay-as-you-go pensions, the government needs to control state pension costs, to protect younger generations of taxpayers.
Increasing state pension age saved huge sums: estimates suggest that the rise in women's state pension age between 2010 and 2016 saved more than £5 billion in public spending. There is a three-fold benefit for the Treasury. First, not paying their pensions. Second, higher tax and national insurance receipts as women keep working while waiting for their state pension. Third, the additional workers should boost the economy.
Rising state pension ages has increased poverty: many of the women waiting longer for their state pension have been pushed into poverty. Research from the Institute for Fiscal Studies found that one in five women aged 60 to 62 were in income poverty when their state pension age was increased to 63 by 2016. The study showed that men have been affected by rising poverty too, as the starting age for receipt of means-tested pension credit has increased in line with rising women's state pension ages.
Governments failed to properly inform people about their state pension age rising: obviously, policy changes of such magnitude need to be communicated well in advance, so people are given time to prepare for delays in starting pension receipt. Unfortunately, as the BackTo60 and WASPI campaigns highlight, the failure to communicate clearly and effectively has caused real problems for many of the women affected.
Continued rise in pension ages makes no allowance for those who cannot work: if older women can stay in work, they can probably manage without their state pension, but many people are caring for loved ones, or are in poor health, or facing ageism in the workplace. There is a stark cliff edge between the benefits available to people below state pension age and those above it. Although this is designed to encourage more people to keep working, it makes no allowances for the significant minority of older people who genuinely cannot work. If they have no private pension or other savings, then they will be struggling.
I believe the government should help - perhaps with early access to state pension and pension credit if needed: although it is not realistic to give all the 1950s-born women their state pension back to age 60 - the cost would be over £150 billion - I do believe that the government has a responsibility to help.
As pensions minister, I proposed allowing early access to the state pension for those in poor health. This would finally recognise the significant differences in healthy life expectancy across the country, which mean that some people genuinely cannot work. Also, those who are caring for others may need to retire.
Yet, under current rules, even if they have paid decades of National Insurance, they cannot get a penny of their state pension early. Another potential reform would allow people to claim pension credit before state pension age, to help the poorest who would otherwise be in poverty. In light of the cost savings from increasing the state pension age, it should surely be possible to offer some mitigation for those worst affected. This could help both men and women.
I do hope the government considers these proposals seriously.
Ros Altmann is a former UK pensions minister.
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