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

Parliament-UK-London-Thames-Building-700x450.jpg

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.”