Women born in 1950s should retire earlier for lower weekly income – MPs
Hundreds of thousands of women born after 6 April 1951 have campaigned for “fair transitional arrangements” to be made, after they claimed they weren’t given adequate notification the State Pension age would increase from 60 to 65 by 2020.
The Work and Pensions Committee which oversees the Department for Work and Pensions, today published a report considering the “alleged failure and shortcomings” in the communication of the State Pension age changes and the impact on women born in the 1950s.
It proposed that these women should be able to draw a State Pension sooner than scheduled in return for lower weekly payments for the duration of their retirement.
This system would ensure that “on average, over the lifetimes of the pensioners concerned, there would be no additional pension costs to the exchequer”.
It gave this scenario: A woman born on 6 January 1955 is scheduled to reach State Pension age on 6 January 2021, aged 66. If she chose to take her State Pension nine months earlier on 6 April 2020, based on the full new State Pension of £155.65, she would receive £149.58 per week in 2016–17, a reduction of £6.07.
If she would otherwise have qualified for a State Pension of £119.30, she would receive £114.65 per week in 2016–17, a reduction of £4.65.
Welcome move but should be applied more widely
The women affected have said this would provide them with a “lifeline” and industry experts have welcomed the idea, but pension firm Aegon said this flexibility should be extended to both men and women.
Steven Cameron, pensions director at Aegon said: “While average life expectancy is increasing, ‘healthy’ life expectancy is much more varied, and working to more advanced ages may not be feasible for all based on health or the challenges of a particular job. This means further increases in State Pension age have to be accompanied by flexibility for individuals to decide to take a reduced amount from an earlier age.”
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “Politically this could be quite attractive as it would show the government is listening and is sympathetic, without it actually having to cost any money. This could also pave the way for everyone to have a more flexible state retirement age in due course. There would be a short term cost as it would bring forward some public spending so it would be important to look very closely at how the reductions to the state pension rate might be applied. ”
The committee said that other options, such as re-calculating all women’s pensions for those born in 1950s as if they were born before then, would be “prohibitively expensive”.
It also looked at a “less costly alternative” to extend the timetable for increasing the State Pension age and a further suggestion is to maintain the qualifying age for pension credit – a means tested benefit that incorporates a minimum guaranteed income for eligible single people and couples.