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MPs challenge Govt on cost of Waspi early state pension take-up

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Influential MPs predict the cost to the Government of allowing a group of women early access to the state pension would be minimal.

Only a third of women eligible for support under the proposal would be likely to do so, according to Conservative MP Craig MacKinlay.

The Work and Pensions committee is conducting an investigation into whether offering early access would provide suitable redress for women who have seen their retirement age increased by successive acts of Parliament.

Government actuaries looking at the proposals last week said the move could require spending of £2.3bn annually, with the cost offset by reduced spending after 2025.

However, committee member MacKinlay says the actual cost could be only £750m, equivalent to just over 32 per cent of women choosing early access.

Citing similar models in operation in Canada, where savers can withdraw their pension early in exchange for a 6 per cent reduction for each year of access, he says: “The experience from Canada is that about 38 per cent of women take it up early. But it might be different to that experience, largely because they don’t have a similar benefits system.

“In the UK, a 62-year-old woman who thought she was getting her pension at 60 would still qualify for job seeker’s allowance of £65, but her pension might be £155, minus 6 per cent for every year it’s brought forward.

“So while the actuaries say net cashflow costs if everyone takes up the early rate would be £2.2bn, a low take-up because of the interactions with benefits could bring it down to somewhere in the region of £750m-£800m. In cashflow terms at that point you are approaching a rounding error.”

The comments come after committee chair Frank Field noted even take-up of 40 per cent would reduce the Government Actuarial estimate of £2.2bn down to just over £900m.

Field said: “Forty per cent of £2bn is the sort of figures which chancellors are sometimes able to lose in their accounts.”

And Informed Choice managing director Martin Bamford notes previous suggestions for reform have included spending up to £30bn to effectively hand Waspi campaigners the pensions they would have previously been entitled to.

He says: “£1bn or £2bn is still a lot of money, but if this plan could be cost-neutral over the long term, then it could be appealing and in the context of money lost on things like tax avoidance, it’s probably not even a huge amount.

“For people who are in the position of needing an income and have found themselves out of work this may be a sensible solution, but  even 40 per cent might be overstating the demand.

“Most would continue to work and have continued to work. Given the choice to keep working or access a lower state pension for the rest of their life, many would choose to keep working.”

Wingate Financial Planning director Alistair Cunningham adds the money could be targeted to those most in need of support.

But he notes for many, the likelihood of having a full National Insurance record, and thus qualifying for the full pension, is slim.

He says: “We are in a place where I can’t see any solution to this. We have to bear in mind those  people who are most in need of it may not have a full NI record anyway, so they won’t be getting that full basic state pension to start off with.

“So even if the cost was zero I would still have an issue with it on the basis that, ultimately, this is going to be in those people’s worst interest over the long term.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Andy Robertson-Fox 29th April 2016 at 10:51 am

    If the estimate for financing early draw down is between £900 million and £2 billion in order to ease the transitional difficulties, should not the Pensions Minister and Chancellor…and Frank Field.. first of all be looking to find the “mere” £580 millıon requıred to index link the pensions of those already retired and being discriminated against; the 550,000 frozen pensıoners? The Waspi women are not being discriminated against however unfortunate the acc*dent of their date of birth may be.

  2. The comments above suggest that £900m is the sort of figures which chancellors are sometimes able to lose in their accounts.
    So as Andy Robertson-Fox has suggested, the Frozen Pension issue is not a financial problem as has been the main argument for years.
    More honesty from our politicians is long overdue and the harm to the UK’s image that this frozen pension garners not to mention the actual cost of implementing it shows that the reasons previously given are totally false.
    The pension is dependent upon the contributions made by the pensioner and employers throughout their working life – no more – no less – so how about scrapping the immoral and divisive section 20 of the Pension Act and give the pensioners the pension that they have paid in for and deserve ?
    As much as one can sympathise with the WASPI ladies the Frozen Pension is a far greater injustice to the 560,000 pensioners affected than theirs is. Had the Frozen Pension issue been against pensioners in the UK then the cry for justice would have been louder and longer.

  3. This whole campaign somewhat gets my goat ‘not advised of the change’ when the Equality Act came into being…. I shall have worked and paid-in NI for 52 years when I can claim my OAP – am I complaining? No – it’s a fact of life. Sometimes in life equality isn’t always in your favour – get over it or stop complaining when it is favourable to you.

    I mean, why can#’t single and childless women have equivalent benefits to maternity rights – let alone men…. and the list could go on… now a full pension is available after only 30 years’ contributions after all (or other reliefs of course).

  4. How very typical of men to comment like this. I just wonder how old you are, and if you have any women in your life that were born in the 1950s? Women who only ever knew that the age at which they got their pension was 60. And i am so angry at people calling us liars, saying that we knew about the changes, when the dwp have admitted that they didnt write single letter for 14 years after the act was passed. And only then to women born between 1951 – 1953, it was another 3 years before they wrote to me, 6 months before i was 60 to tell me i wont get my pension till i am nearly 66. So please get your facts right before you start criticising us. And men do get paternity rights now i believe!

  5. With the triple-lock increases between now and when women retire (or at least the next few years) how can they be quoting a 5% – 6% per year reduction! How is that not further injustice.
    My pension is capped anyway and I’m waiting around for another 5+ years to get the same pension amount I would have drawn at 60, so how is a reduced pension fair for me.

  6. The Govt Actuary based his figures on his assumption that the women will have an average expected SP of 95% of flat-rate so about £147 weekly. This seems a lot higher than the forecasts being posted on the WASPI site, suggesting the £2.3bn is also too high.

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