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Scott Gallacher: Sting in the Waspi tale

As an adviser it is no surprise I try to keep up to date with everything surrounding personal finance. This is not just for the continuing professional development requirement but also that I am passionate about the subject and want to be able to give my clients the best. Of course, the general public have different priorities and are not likely to be as up to date. But this can cause problems.

One such example of this difference in knowledge is highlighted by the current Women Against State Pension Inequality (Waspi) campaign.

Waspi is campaigning against what it sees as unfair changes to the state pension age imposed on women born in the 1950s. It is asking the Government to make fair transitional arrangements for all women born on or after 6 April 1951 who have “unfairly” borne the burden of the increase to the state pension age. Hundreds of thousands of women have had significant changes imposed on them with what Waspi considers a lack of appropriate notification.

The use of “inequality” is unfortunate, given the changes were all about achieving equality between men and women’s retirement age, itself prompted by a legal challenge by a group of men that claimed their retirement age of 65 compared with  women’s of 60, was discriminatory.

Naturally, rather than reducing men’s state pension age from 65 to 60, the Government equalised the age at 65 for both men and women (ultimately increasing to 68). This was decided in 1995, with later changes in 2011.

As with all changes like this, there are losers. The Government could certainly have done more to inform people earlier. However, even if they had been made aware earlier, there is little most women could have done as those most affected are in low-paid employment with little savings. Unsurprisingly, there are examples of women who have taken early retirement safe in the supposed knowledge their state pension would commence at 60 that now face up to five years with little or no income.

However, perhaps the biggest lesson from this affair should be those retiring early could have taken professional financial advice. Had they done so, they would have either been informed of the increasing state pension age or at least have a valid claim against that adviser. Unfortunately the vast majority of the general public still do not want to take professional advice.

The FCA’s Financial Advice Market Review paper calling for input into this listed eight reasons that stop people seeking advice. With regard to the state pension age increase overconfidence (“some consumers might believe they are as competent as a professional adviser, even though in reality they could benefit from using one”) and advice not necessary (“consumers may make a rational and reasonable decision that they do not need advice”) are perhaps the most relevant.

I would suggest these two points are arguably one and the same, and Waspi’s campaign is evidence the  public is far too over-confident in its knowledge. It is a simple case of you do not know what you do not know.

Unfortunately I do not think this lesson will be considered by Waspi or the general public, who are simply looking for someone to blame.

Scott Gallacher is director of Rowley Turton 

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. Scott, what you don’t seem to grasp is that it is not anything to do with the public being far too over confident, its to do with the 2 to 3 hundred thousand women caught in this age group who are being denied the opportunity to retire at an age they had planned to retire !
    This legislation has been passed by the two houses in 2011 with little or no information being passed to the women concerned on how they would be affected. This is inexcusable. It is now when they the first tranch are to retire, these women have been sent information from the Dept of work and Pensions that they have become aware of the effect that this will have on their retirement plans. These women should receive compensation of around £30k each.
    Marie Black MP spoke in the house yesterday bringing this situation to the fore. She said that we can spend millions bombing Syria and millions on Trident but we cannot look after these women, its a disgrace.
    Your second last paragraph sentence ” It is a simple case of you do not know what you do not know.” is guff.

  2. I don’t disagree with Scott about the role of advice although the reality is that many of those affected couldn’t afford it. I also don’t agree with the WASPI blanket opposition to equalisation and accept there will be winners and losers. What is wrong however is that the 2011 legislation unfairly discriminated against a small group of women – primarily those born between 6 April 1953 and 6 January 1954 – by imposing a more penal deferment methodology on that group than applied to any other group. This leads to the well quoted example of a group of women from the same academic year having SPAs which vary by 2 years 10 months. That’s a nonsense and unjust.

    • I am inclined to agree with John Moret’s view in which case the worst unfairly affected looses a max of about £18k based on the 2 years 10 months difference.
      I do think therefore, some tweaking is needed, but ONLY for those born between 6 April 1953 and 6 January 1954.
      In addition, it should not be “compensation” it should just be a slight adjustment to the rules to enable the pension to start without so large a differential compared to those in the same school year.

  3. “These women should receive compensation of around £30k each”

    How did you arrive at that figure?

    Who is going to pay for this compensation?

  4. The compensation should have read -varying compensation of £42k . ie – state pension of £7k x difference of age 61to age 66 -6 years (varies from age the person was original due to retire to the now age of 66)
    This effects women who were born from 1950/51 to 1955.

  5. @ Lawrie and others
    A report of the debate quotes a Labour MP providing figures of 500,000 facing a delay of more than a year and a further 300,000 18months, at an average cost of £12k each. My calculator tells me that’s a cost of £10Billion (less change).
    What none of those speaking in favour of WASPI and their supporters have been so vocal about, though, is where this money should come from. Perhaps George should just borrow it; after all it’s not as if anyone is criticising him for not bringing the deficit down fast enough is it? Or reinstate the tax credit cuts? What could be fairer – or should that be “more equal” – than requiring the generation that has so little of the wealth of the UK subsidising the one that has most of it so they can continue retiring 7/8 years earlier than they are being told they will be able to?
    Also, what is not being mentioned is that the change to women’s retirement age that is being complained about is not one, but a combination of two changes: firstly the acceleration of the increase to 65, and then the increase from 65 to 66. The latter also affects all men, as the original intention was for age 66 to become the SPA for all by 2024, but the 2011 changes accelerated this to occur between 2018 and 2020. I saw one such male earlier today who was originally going to be retiring at 65, but now finds his SPA is 66. So surely if “inequality” is to be eradicated then there are going to be hundreds of thousands of men to be compensated as well? In which case scratch the sum of £10Billion above!

  6. Without going into compensation speculation, I would point out to Scott that that article is bordering on arrogance. Why? Because you assume everyone should be financially aware as you are. That’s your job. The waspi ladies probably don’t read the financial press, don’t work in the city go to the pub after work from their well paid job for a drink and discuss the world of finance. These are in the majority of ladies who are of a generation who suffered much inequality, brought up families and worked to supplement household income. Lifestyles and attitudes have changed hugely in subsequent decades and trawling through every newspaper on a daily basis to check if some incumbent government may have changed their pension age and not making any effort to announce to the public correctly. As John Moret pointed out, most people couldn’t afford to pay for a financial adviser. Like politicians some people in the financial world forget the highest % of people have limited financial savvy. Criticising ladies of waspi is arrogant, and anyone who can’t see both sides of the reasoning certainly wouldn’t get my business.

  7. @Lawrie

    I am struggling to see the link between the Pensions Act 2011 and the compensation you have calculated.

    This is before even considering whether the cohort of women affected should be entitled to that amount.

  8. Ian, I’m sorry that you see my comments as arrogant.

    I don’t think my article criticises the WASPI women, nor that it supposed that they had the relevant information to hand.

    You state that “you assume everyone should be financially aware as you are” when in fact I specifically said “the general public have different priorities and are not likely to be as up to date”.

    My article simply gives a possible reason for issue that they now face.

    I would have thought that the article was fair comment based on reasonable evidence from the FCA’s won research as to why people don’t take advice.

    As for the cost of advice, this is largely a red herring as until very recently almost all financial advice was paid for by commission with the ‘man or woman in the street’ being able to receive advice without fees.

  9. Scott
    If your saying your article is about financial advice, then using waspi campaign as an example is poor. These women and their husbands thanks to radio and TVs advertising will be aware of misselling, poor endowment, and various products over the past few decades. Once bitten twice shy. The financial industry will take years to build a good reputation. Have another look at the last para then see the context it can be taken. Ivory towers come to mind. The term general public is derogatory in that context.

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