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LEBC: 1950s-born women are subsidising next generations

Millennial man Tom Selby of AJ Bell recently argued the country could not afford a reversal of state retirement age for 1950s women and that to do so would create an unfair burden on younger generations asked to subsidise this change.

As a 1950s-born woman I would like to explain why the intergenerational subsidy is in fact from these women to the younger generation.

It has arisen from the continuous raiding of the national insurance fund by successive governments, of all persuasions, to subsidise spending in other areas. Had this raid on NI contributions not taken place, the national insurance fund would be capable of funding pensions from age 60, without the need for any taxpayer subsidy. Indeed, in the interests of gender equality, the retirement age for men and women could have been set somewhere between 60 and 65.

In the 1970s there was no auto enrolment pensions subsidised with tax relief and until the 1990s it was legal to offer women inferior pension rights to men. Rights to a frozen pension required five years’ service until 1986 with more women than men missing out due to career breaks to have children, thus sacrificing their pensions and earnings potential for the next generation. Maternity leave was much less generous and paternity leave non-existent. There was no government funded subsidy for childcare costs, with women who chose to return to work paying for childcare out of their net of tax earnings.

Back then only 12.5 per cent of the population went into higher education, compared to 49 per cent today. Raiding the NI fund to pay for the expansion of higher education, generous statutory maternity pay and child care subsidy has benefited the younger generation. While all these innovations are welcome, they have been earned by the tax and NI contributions made by older women, who are now facing hardship due to successive and rapid changes in the state pension age, of which they were not warned until very recently.

Unless you are a woman who reached adulthood in the 1970s it is hard to understand the unlevel playing field which many of these women faced in employment and the sexist assumptions which ruled the early part of their working lives, leaving women at 65 today with one fifth of the pension accrued by their male contemporaries.

While the Equal Pay and Sex Discrimination Acts came into being in the mid-70s, many 1950s-born women had been working for less pay and paying national insurance from a decade earlier. Employment practices did not always reflect the law. As late as the 1980s it was common for women interviewees to be asked about their plans for marriage and children and normal for women to have to outperform their male contemporaries to get the same job.

The biggest failure of all is not a lack of understanding between generations but the failure of governments, since 1995, to communicate successive changes in state retirement age to those affected by them. In the recent court hearing counsel for the Department for Work and Pensions argued there was no legal duty for the government to tell every person affected by this change.

While legally that may be correct, morally and practically it is indefensible. The cost of a letter to every woman affected would have been a drop in the ocean compared to the legal costs and the misery which left these women uninformed and unprepared for a six-year extension in their state retirement age.

Kay Ingram is director of public policy at LEBC Group

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Comments

There are 18 comments at the moment, we would love to hear your opinion too.

  1. Well said…Couldn’t have put it better this division of young and old has to stop we are fighting not only for ourselves but for the generations to come so they don’t suffer the same injustice goverment needs to stop plundering the NI fund and pay back what they have stolen starting with the £271 billion they decided not to pay in followed by the billions taken recently to pay off the national debt….then we wouldn’t be in this position

    • @ Jane

      “the billions taken recently to pay off the national debt”

      Can you please clarify how many billions were taken from the National Insurance fund to pay off the national debt, and when this happened?

      Thanks

      • Information was requested via Freedom of information re DWP….I will try to find the date for you and post it

        • Ok hv found some info but it does not allow me to post a photo on here however, FOI dated 18.1.19 last para states….NIF account shows that the balance of nifty fund increased by £2,286,469,0000 in 2017/18 in addition to the previous balance this resulted in a closing balance of £24,221,220,000 which was paid into the NIF investment account and in practice used to reduce the national debt…..other details can be found on full facts.org re what happens to money from NIC published 1.3.19….hope this is useful

          • Suzanne Albright 14th June 2019 at 9:41 am

            Unfortunately, the FOI gets misinterpreted. It states that the national debt gets REDUCED but people interpret this a PAYING OFF national debt.

            The reduction of the national debt with NI money is temporary as all the NI money is immediately repayable on demand to the NI Fund. Putting the NI money which is not needed immediately into the national debt account is a prudent matter – it reduces the amount of interest Government (i.e. we, as a nation) have to pay on the debt, and the NI Fund earns a small amount of interest (BoE rates) whilst used in this manner.

            The House of Commons Library says in its briefing on National Insurance, “Since 2007 the Fund has been invested in the Government’s ‘Call Notice Deposit Account’, administered by the Debt Management Office… It is worth emphasizing that these funds are being held in this account *****on loan*****… there is no question of the Government being in a position to use this facility to extract money from the Fund as an extra source of revenue.”

            You can read the full report on https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN04517

            You can also check the audited NI Fund accounts. You will see that the NI Fund receives interest on the balance. In 2017-18, the interest received was almost £77 million. The NI Fund accounts also contain further detail on the handling of temporary surplus funds.

            NI Fund accounts are online at https://www.gov.uk/government/publications/national-insurance-fund-accounts

            Finally, in case you would argue that the current NI Fund balance should be used to pay 1950s women a state pension from age 60: it would be nowhere near enough to actually do so. The present balance is some £24 billion, and the annual intake has been in deficit for a few years running. The cost of the demands of the Back To 60 campaign is in the region of £181 billion (for details, see https://www.gov.uk/government/publications/analysis-relating-to-state-pension-age-changes-from-the-1995-and-2011-pensions-acts/analysis-relating-to-state-pension-age-changes-from-the-1995-and-2011-pensions-acts)

            Using the entire NI balance it would also exhaust the ability of the NI Fund to react to changes in the economic cycle – i.e. it would lead to situations in which state pensions to existing pensioners cannot be paid because the monthly outgoings exceed the monthly income. This would, I am sure you agree, represent an unacceptable chaos.

          • @ Jane

            Thanks for taking the time to provide that information.

            As Suzanne covers above, the wording of the FOI can give a misleading impression of what actually happens in practice.

            Rather than money flowing out of the NI fund to pay off debt, it is temporarily offset against the national debt, which reduces the interest payments so is prudent practice.

            There are a lot of claims flying around, both within this article and elsewhere, about money flowing out of the National Insurance fund for other purposes. This is NOT happening – the accounts are audited and a matter of public record, and show the money coming in and out on an annual basis.

  2. “While legally that may be correct, morally and practically it is indefensible. The cost of a letter to every woman affected would have been a drop in the ocean compared to the legal costs and the misery which left these women uninformed and unprepared for a six-year extension in their state retirement age.”

    It would have been a total waste of money as everyone already knew, thanks to extensive coverage in the media, magazines and leaflets in the run up to the 1995 Pensions Act.

    In numerous forum and social media posts outside the WASPI echo chamber, hairdressers, factory workers and checkout staff have all said they were well aware that their State Pension Age had changed. Everyone knew women’s State Pension Age was going up, including most WASPI members.

    There is no National Insurance fund. There is only tax and government spending.

    You are not getting a £30,000+ cheque from the Government in return for “intergenerational subsidy”.

    The legal costs are entirely WASPI’s responsibility for a frivolous legal challenge which has been defeated on every front.

  3. @ Kay

    There are references in the article to continuous raiding of the National Insurance fund to subsidise spending in other areas.

    My understanding is that the NIF is that an allocation is made to the NHS, but otherwise the receipts into the fund are kept separate from all other tax revenue, and used to pay social benefits including the state pension.

    Can you please elaborate on when these raids happened, the sums involved, and what specifically was funded? There’s a suggestion in the article that one of the raids was to subsidise childcare costs, which suggests that it was fairly recent?

    • Andy Robertson-Fox 13th June 2019 at 6:12 am

      There is a current surplus in the Fund of around 23 billion pounds, this is deposited with the DMO and the government is allowed to borrow at a low interest and to finance new projects linked with the infrastructure. The surplus remains the property of the NI Fund…even if the author is correct in her arithmetic the government certainly does not have that amount of money available and secondly, of course, if it had, it would have to be divided accordingly between all pensioners, having been denied them originally and not just the Waspi and Back to sixty complainants.

      • Suzanne Albright 13th June 2019 at 9:12 pm

        There’s no surplus as such. The figures just represent the closing balance at the end of a financial year.

        The NI Fund must at all times have a statutory balance of 1/6th of the expected annual spend. Given the spend was around £100 billion last year, and that spend increases year on year, around £16 billion must be kept in reserve at all times.

        So you could argue that £23bn – £16bn = £7bn is a surplus. When you look at the Quinquennial Review of the Government Actuary, however, you will see that the entire NI Fund is likely to run on empty by the early 2030s. Some substantial changes have to happen to cope with this situation – the SPA increases are only just the start of much more unpleasant news we’ll have to live with.

        Giving the £7bn to the 1950s women wouldn’t help much. It wouldn’t even be enough for one year’s worth of state pension for them, never mind the 6 years some of them want to get back payments for.

        • Andy Robertson-Fox 14th June 2019 at 5:28 pm

          That figure is actually the end of the month balance, not end of year and the surplus, according to GAD, is estimated to be over 60 billion by 2030 but even so, the frozen pensioners, who have been denied index linking and whose pension never rises from the level first paid in the frozen territory should certainly take priority over some women who will receive what they are entitled to.

          • Suzanne Albright 17th June 2019 at 9:30 pm

            I have never seen any monthly balance published. I only know of the annual NI Fund accounts which are all for the year ending 31 March.

            I also haven’t seen any GAD estimate of 60 billion “surplus” by 2030. The latest GAD report I can find states that

            1 – without additional support in addition to NICs, the Fund balance will fall rapidly to exhaustion in around 2032-33

            2 – Treasury Grants would be required from around 2030 (i.e. balance falls below the statutory minimum balance)

            Have you got a link for the 60 billion balance, please, and for the monthly balances?

          • Andy Robertson-Fox 19th June 2019 at 4:59 am

            @ Suzanne Albright. Hope this works!
            1. Monthly surplus balance held in NI Fund was on 31st May GBP31 billion and can be found on

            https://www.dmo.gov.uk/responsibilities/public-sector-funds-cmd/investment-accounts/curren-funds-market-value/
            and then click on the word ‘here’

            2.Suggest you google
            GAD-Uprating Report 2019 and the find Table 5.4

    • Suzanne Albright 13th June 2019 at 9:23 pm

      @Mick Hudson

      Great observations and good questions. The author has been asked the same questions by various people on Twitter, in the thread she started to make people aware of this article. She has chosen to delete that thread so no answers have been forthcoming on Twitter. I hope you will have better luck and get a detailed answer.

      • @ Suzanne

        We’ll see if Kay is able to provide some concrete evidence to support the claims.

        The article also asserts that if the alleged continuous raiding had not took place, state pensions would be affordable at age 60 for women, or somewhere between 60 and 65 for men and women if equality is important.

        This completely goes against the findings of both the Turner and Cridland reviews, so it would be really interesting to see the analysis that supports this conclusion as well.

  4. As usual a lot of men have zero sympathy for women, whether it has to do with pensions or anything else. I agree with the article and with the main thrust of Jane Roberts’ argument.

    The DWP counsel has, more or less, said it doesn’t care about women’s misfortune, as long as their legal point is gets them off the hook.

    Women continue to be undervalued and unappreciated by a significant proportion of men and, as far as comments about everyone knowing women’s State Pension age was going up; well that sounds like it is making women out to be nothing more than liars. And it ignores the high probability that there are hundreds of thousands, if not millions of people, that don’t read, listen to or watch the news and to claim otherwise makes me wonder how much of an understanding some people have of human nature.

    • Suzanne Albright 17th June 2019 at 9:40 pm

      @Patrick Schan

      As you say you agree with the article, could you provide answers to the questions Mick Hudson asked of the author? As she appears to be too busy and has as yet not got back.

      To recap:

      Can you please elaborate on when these raids happened, the sums involved, and what specifically was funded? There’s a suggestion in the article that one of the raids was to subsidise childcare costs, which suggests that it was fairly recent?

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