Thursday, 31 December 2015


The Department for Work and Pensions has finally answered two Freedom of Information requests about the new state pension and the letters written to women whose pension age was postponed twice. Initially both requests were refused.

Pension letters destroyed if not delivered
Letters written to women warning them of rises in their state pension age which were returned undelivered by Royal Mail were destroyed and no further action was taken to find the women concerned. No record was kept of how many letters were returned.

Part of the changes to state pension is the rise in the State Pension Age. This has hit women harder than men and data provided under FOI showed that the Department failed for 14 years to begin to inform women of changes passed in 1995. That exercise began in 2009 and was halted in March 2011. Women's state pension age was changed again in November 2011 and the DWP then restarted writing individual letters from January 2012 to inform women of their new state pension age including both changes. That was often the first they had heard of any change. But many women claim they never received such a letter.

A global study of data quality to be published by the credit reference and address validation agency Experian found that 23% of customer prospect data - including names and addresses - contained errors. That does not mean nearly a quarter will not arrive. But many were clearly at risk of not doing so. That raises the question of what the Department did to deal with this problem.

Initially the DWP refused my Freedom of Information request for more details of how many letters were returned and what happened to them, on grounds of cost. But on review the DWP agreed to give answers.

  • QUESTION: What information does the DWP hold on how many of those letters in any or all of those batches were returned by Royal Mail?
  • REPLY: DWP no longer has access to this information. To support the principles of the Data Protection Act 1998, DWP has a Records Management Policy. This confirms the retention periods for DWP products and, in line with this Policy, there was no specific reason to retain these letters.
  • QUESTION: When letters were returned as above what further steps were taken to try to find the people concerned?
  • REPLY: The letters were issued to the customers’ latest address held on HMRC records. No followup action was taken on any letters that were returned undelivered as DWP had no further information on the customers’ whereabouts. 

No state pension
Women are the big losers from a new rule under which people with fewer than ten years of National Insurance contributions get no new state pension. Under the old rules (since 2010) people with under ten years contributions get a pro rata pension of 1/30th of the full amount for each year of contributions. Under the new pension they get nothing. Nearly three quarters f those affected will be women.

On 14 January 2016 the DWP published Impact of New State Pension (nSP) on an Individual's Pension Entitlement which shows that from 2016 to 2050 a total of 110,000 people will get no new State pension because they have fewer than ten qualifying years of NICs. Of those 110,000, 80,000 (73%) are women and 30,000 (27%) are men.

The estimate of around 3200 people a year is rather lower than those published in the Impact Assessment in May 2014. Those lacked some detail and were not broken down into men and women. But the table showed that in each of the five years from 2016/17 to 2020/21 between 9000 and 12,000 people living in the UK would be denied a new state pension because of this rule. That is between 2% and 3% of those reaching state pension age in that period and a total of between 45,000 and 60,000 in just five years. A further 6000 to 10,000 a year who lived abroad would also would not qualify which is 18% to 23% of those living abroad reaching state pension age (see Table 3.1 on p27).

Further information
Women will get less than men from the new state pension
Women given just two years' notice of state pension age rise 

version 2.00
1 March 2016

Wednesday, 30 December 2015



Flood Re is part of a plan which is intended to ensure that homes at a high risk of flooding will be able to obtain buildings and contents insurance at a reasonable cost.

It begins throughout the UK on 4 April 2016. From that date an estimated 350,000 dwellings at high risk of flooding will be put into the Flood Re scheme.

Flood Re will be funded by a levy on all insurance companies. From 4 April 2016 all home insurance policies will include a supplement which will pay for that levy. The Government has estimated that will add around £10.50 a year per policy. It will almost certainly not be shown separately on insurance premium bills. But as part of the premium it will be subject to insurance premium tax of 9.5% which would add £1 to that amount. The levy will be reviewed in the first five years of the scheme and if it changes the supplement could change too. Almost all insurers are expected to join Flood Re and all of them, in Flood Re or not, will pay the levy based on the amount of home and contents business they do.

In Flood Re
If your home is put into the scheme by your insurer the flood risk element of your insurance will be charged at a fixed rate depending on your council tax band (valuation band in Northern Ireland). The amount for combined buildings and contents will range from £210 a year for the lowest band properties through £276 in the mid-range to £1200 a year for the highest. If you insure just the buildings or the contents the amounts will be lower. Details here 

Those are the fees that Flood Re will charge your insurer for taking on the flood risk. The insurer can pass those costs on to customers or can charge more or less than that for the flood risk. Charging less is very unlikely. The excess on the policy - the amount that has to be paid by the insured in the event of a claim - will also be fixed at £250 on this flood risk element. But again your insurer can charge whatever excess on this part which it chooses.

The rest of the insurance against all other risks will be estimated and charged as normal by your insurer on top of the amount for the flood risk. There is no guarantee what these premiums will be or what excess will be charged. The premium you pay will include all risks, including the flood risk passed to Flood Re, and you will not see those as separate elements in your premium. 

Your home will only be put in the scheme if your insurer chooses to do so. It is not clear if there will be any mechanism to request a property is or is not put into the scheme or to appeal against a decision. 

Flood Re expects to have 350,000 properties passed to it in the first year. It claims it can accommodate more than that but it is entirely up to insurers to decide which properties to include. The Environment Agency has estimated that more than 5 million homes are at some risk of flooding.

If a claim arises for flood damage the householder will claim directly to their insurers not to Flood Re which will have no contact with consumers.

Excluded from Flood Re
Some properties will specifically be excluded from the scheme even if they are at high risk of flooding. These include

·         Homes built from 1 January 2009
·         Purpose built blocks of flats
·         Houses converted into flats. But if the freeholder lives there and there are only one or two other units it can be part of Flood Re.
·         Buy to let property where the landlord arranges insurance.
·         Commercial property
·         Mixed use property – for example flats over shops.
·         Social housing buildings – but contents can be part of Flood Re.

The rules are complex. More details from Flood Re  

It is not clear whether or at what price these excluded properties will be insurable.

May be excluded in future
Flood Re Chief Executive Brendan McCafferty has said that homes liable to frequent flooding could be excluded from the scheme if the owner did not invest in flood resilience measures. Flood Re would gather information over the next few years and decide if these homeowners could be taken out of the scheme after three claims. He also some very high risk properties that flood every year or two could be excluded from the scheme whatever steps they took.

Not in Flood Re
If your home is one of the estimated 5 million or so homes at some risk of flooding but is not in Flood Re then insurers will no longer make any guarantees about providing insurance nor about the level of premiums or excess charged on these homes. The existing deal called Flood Insurance Statement of Principles will end on 4 April 2016 when Flood Re begins.

The Statement of Principles, which in one form or another was in force since 2000, guaranteed that your existing insurer would offer insurance – though at an uncapped premium – and included all properties. From 4 April 2016 all homes not in Flood Re will be subject to normal market forces including those at risk of flooding. Insurers can refuse to insure homes at flood risk or insure them on any terms, with any premium or excess they choose. The industry hopes that firms will be able to offer insurance on all property either by putting it into Flood Re or, if the risk of flooding is low, then taking on that risk in the normal way. But whether that happens remains to be seen.

The future
The Association of British Insurers says that in the 1990s there were three flood events which led to claims of £150m or more. This century there has been one a year. Further bad weather will test this latest effort to provide insurance to its limits.

Matt Cullen of the Association of British Insurers and Brendan McCafferty, Chief Executive of Flood Re, explained the scheme from their point of view on Money Box 9 January 2016.

Version 1.2
12 January 2016

Wednesday, 9 December 2015


Are all the niggles and unfairnesses of the new State Pension there because of the pressing need to ensure it costs no more than the old one? 

I gave my evidence to the Work & Pensions Select Committee in Parliament on 25 November 2015. Before I was questioned the MPs quizzed the former Pensions Minister Steve Webb. He lost his seat in the General Election and is now Director of Policy at the insurers Royal London.

He admitted quite frankly to the Committee that his reforms of the state pension – which begins on 6 April – had to be done at nil cost. Or as he put it “When I went to the Treasury wanting to reform the State Pension, the one thing they said to me is—and I paraphrase slightly—‘Steve, you can do what the hell you like, just don’t spend any more money.’”

In fact the new state pension will, in the long term, cost less than the present one. Job done. But the more I looked at the various groups and campaigners who are complaining about how the new state pension will treat them the more I thought that every niggling unfairness about it came from Steve Webb’s nil cost brief.

Now, without sounding too much like Meryl Streep and Steve Martin, it’s complicated. So bear with me.

1. Women born 6 April 1951 to 5 April 1953 all reach state pension age before the new state pension begins. So they won’t get the new state pension. But men of the same age – who will be 65 when it begins – will. That is sex discrimination and they want the choice to have new or old.

2. The problems of women born 6 April 1953 to 5 April 1959 were covered in this newsletter two weeks ago. They were told about their state pension age rise just a couple of years before they were 60 and their age was raised not once but twice. That didn’t happen to any men.

3. As I reported here three weeks ago women will generally do less well than men out of the new state pension. Even by the 2050s one in seven women won’t get the full amount because they don’t have 35 years’ contributions compared with one in ten men. It is also expected that more women than men will not get a pension at all because they won’t get the minimum ten years’ contributions.

4. The new state pension will not allow women to claim a pension on their husband’s contributions either while he is alive or after his death. If they have an inadequate pension of their own they will have to rely on means-tested pension credit which is itself being cut by up to £13 a week.

5. Transitional rules cut back on the new State Pension for anyone who was not paying into SERPS and the State Second Pension which topped up the basic pension. As a result many will get little more than the old state pension in the first years of the new scheme. DWP figures show women are more likely to be affected than men.

6. And finally the cold-towel-round-head rules which affect people who were in company schemes. Under these rules the DWP will no longer inflation-proof part of their company scheme through the state pension. This rule will probably affect men more than women.

All those six items cut the cost of the new state pension. And of course help it to come in under the cost of the old as the Treasury demanded of Steve Webb. All of them leave some groups – mainly women – feeling unfairly treated. Perhaps it’s a price worth paying to simplify the state pension and keep it affordable in the long term. But we should at least be clear who is paying that price.

Oral evidence by Steve Webb, me, and Sally West from Age UK.

Version 1.01
7 March 2016

Sunday, 29 November 2015


The new rates for social security benefits from April were quietly issued on Thursday 26 November in a written statement in the House of Lords by Pensions Minister Baroness Altmann. It linked to fifteen pages listing every DWP payment, what it is this year and what it will be for 2016/17. And the two columns are almost identical. Every single benefit paid to people under pension age is unchanged.

In other words all benefits – with the exceptions below – are frozen. No rise at all in April. Zero. Zip. Zilch.

There are two reasons for that. One group of benefits such as jobseeker’s allowance, income support, and child benefit are unchanged because the Chancellor announced in his Summer Budget that they would be frozen for four years saving £4 billion a year by 2019/20. The rest, such as disability living allowance, carer’s allowance, maternity allowance, and widow’s benefits, are unchanged because inflation is effectively zero. The September CPI showed a slight fall in prices of -0.1% and negative inflation counts as zero. So between these two rules all working age benefits are frozen. Children, disability, illness, widowhood, caring , unemployment - none of those merit even a 1p a week rise.

Pensioners gain
How different it is when we come to that magic word ‘pensioner’. People over the age of 63 – when women will be entitled to state pension from April – will generally find they get more from April.

Their benefits and allowances will rise. The basic state pension will go up by the rise in earnings of 2.9% from £115.95 to £119.30, an extra £3.35 a week. But, and it is quite a big but for some, all the extras paid with the state pension – SERPS, State Second Pension, extra pension earned by deferring or by paying Class 3A contributions, and graduated pension – will all be frozen. A point not mentioned by the Chancellor in his Autumn Statement speech.

The full rate of the new State Pension was fixed, as predicted here a while ago, at £155.65 a week, though for transitional reasons most new pensioners will get less than that rate in the first years of the new state pension. Many will get what they would have had under the old system or a little more, especially women. Click for the full story of women doing worse than men from the new state pension.

Pension Credit for the poorest pensioners will also rise by 2.9% - up by £4.40 from £151.20 a week to £155.60 for a single person and up £6.70 for a couple from £230.85 £237.55. That will benefit 1.1m people. But most of that rise will be clawed back from the 1.4m who are slightly above the poorest level who get savings credit as well. That will leave them with only about £2.02 a week out of the £3.35 of the state pension rise. The figure for couples is keeping £3.21 from an extra £5.35. Overall the maximum income to get any pension credit is frozen at £188 single and £274 couple.

Housing benefit which helps pay for rent distinguishes between those under and over state pension age. No rise for those under - single, couple, disabled, children - all frozen. But there is a rise of 2.9% for those over pension age and even higher amounts for those over 65. Pensioners are not subject to the hated bedroom tax either.

The same rises will be found in local council tax support schemes where older people are fully protected against the cuts imposed on working age people.

Winter Fuel Payment is frozen again as expected.

But the few niggles about minor items not changed cannot hide the fact that the big social security winners are older people. As the Chancellor made clear in his speech

“The first objective of this Spending Review is to give unprecedented support to health, social care, and our pensioners.”
Perhaps that is why he gave these fifteen pages of bad news on benefits for everyone else to the Pensions Minister to quietly slip out in the House of Lords on a Thursday afternoon.

1 March 2016
Version 1.10

Friday, 27 November 2015


Stamp Duty Land Tax (SDLT) is charged at a higher rate from 1 April 2016 on what is called an 'additional' home. Broadly that means a home that is not the one you live in. 

The rates charged on each band in England Wales and Northern Ireland will be

£1 to £125,000
£125,001 to £250,000
£250,001 to £925,000
£925,001 to £1,500,000
Above £1,500,000

SDLT1 is the tax when you the home you live in (main residence)
SDLT2 is the tax when you buy an additional home (not your main residence)

There are some properties that are exempt including caravans, mobile homes, and houseboats. Homes sold for £40,000 or less are also exempt. But for homes over that price the 3% tax will apply to the first £125,000 - there is no exempt band. Here are some examples.

SDLT2 applies to a home which is bought but which you do not immediately live in as your main residence. So if you purchase a buy-to-let property - including furnished holiday lets - or a second home for holidays or weekends then SDLT2 will apply. 

If you buy a home to live in but for some reason cannot or do not sell your previous residence at the same time, SDLT2 will be charged. If you sell the original residence within 36 months the extra tax - the difference between SDLT2 and SDLT1 - can be refunded by HMRC. This rule and timetable applies even if the new purchase is not fit for human habitation and has to be done up to live in. But SDLT2 does not apply if the property purchased is not a residential property at the time you buy it - for example a barn, a church, or an industrial unit.

If you own the home you live in and also own a second home - a holiday home or weekend retreat for example or a property you rent out - you will not pay SDLT2 if you sell the home you live in and buy another to live in immediately. But you will be liable to SDLT2 if you sell your holiday home or rented property and buy another which is not your main residence. You will also be liable to SDLT2 if you buy another home to live in, move into it, but do not sell the home you left within thirty six months. That period normally runs from the day you bought the second home. But a concession means that if you bought your new main residence before the SDLT2 announcement was made on 25 November 2015 then the 36 months runs from that date . So you have until 26 November 2018 to sell your old main residence. 

If a home is bought jointly and one buyer owns another main residence but the other does not then SDLT2 will apply to the whole purchase price. So for example if a parent who owns their own home helps a child with a property purchase that will trigger SDLT2 on the whole cost if the parent is registered as a joint owner. SDLT2 will apply to the whole of the purchase price not just the share of it owned by the person with another main residence. 

Main residence
The home you live in is called your 'main residence'. It is not like Principle Private Residence for Capital Gains Tax where you can nominate a property to be your PPR. Nor is it decided simply on days of occupation. It is a matter of fact - where you and your family spend your time, where your work is, where your children go to school, where you are registered to vote, where correspondence from government or businesses is sent. 

Couples who are joint owners of the home they share will pay SDLT2 if they buy a second property and keep the first. But if one of them wholly owns the home they share the rules are different depending on whether they are married/civil partnered or not. 
  • If they are not married/CP'd then the partner who is not an owner of the home they live in can buy a separate home without paying SDLT2 as long as one partner will live there as their main residence. 
  • If they are married/CP'd then they will pay SDLT2 on a separate home they buy. But if they are separated and their relationship is ending this rule will not apply.
There is no concession for a person who buys a separate home for work. For example their family lives in one part of the country but they buy a flat which they live in four nights a week for work. That second home will be subject to SDLT2.

Landlords who rent
Someone who owns one or more homes which they rent out to tenants but lives in a home which they rent from someone else will pay SDLT2 if they then buy a home to live in. This odd anomaly means that a landlord who rents the home they live in pays SDLT2 when buying a main residence but one who owns the house they live in and buys another to replace it does not. 

However, this rule may not apply to a landlord who rents but who has owned their main residence in the past. A landlord who lives in a home they own, then sells it, and temporarily rents their main residence has 36 months from selling the first to buy a replacement. 

However, the three years runs from the day the new SDLT rules were announced on 25 November 2015. So as long as the landlord replaces his main residence by 26 November 2018 they will not have to pay SDLT2 on their new main residence. This concession means that a landlord who has ever owned their main residence but who now rents their main residence from another landlord has until 26 November 2018 to buy a main residence free of SDLT2. 

Solicitors may be unaware of this loophole and charge SDLT2 on the home that is purchased by a renting landlord. If so, then the excess tax can then be recovered from HMRC. 

SDLT2 applies from 1 April 2016. Completion must have happened on or before 31 March 2016 to avoid it. The one exception is if contracts were exchanged on or before 25 November (Autumn Statement day) but completion is after 31 March then SDLT2 will not apply. That may help with off-plan purchases made well in advance of the building being finished. 

From 1 April purchasers have to fill in a declaration that they do or do not own another home. The conveyancer or solicitor will use that to decide which rate of SDLT applies.

SDLT applies in England, Wales, and Northern Ireland. It does not apply in Scotland which has its own property tax called Land & Buildings Transaction Tax (LBTT). It also charges an extra 3% tax on each band from 1 April 2016.

SDLT2 will apply equally to people who live outside England, Wales, and Northern Ireland and buy property here. They will have to fill in the same declaration on property ownership. A Scottish resident who bought a second home in England would pay SDLT2 on the purchase. As would a resident of Dubai, Germany, or Australia. 

This blogpost is based on detailed discussions with HM Treasury and the law as published and passed by Parliament. I believe it is correct. However, you should treat this blogpost as a guide only and take professional advice before acting on the information contained in it. I accept no liability for any losses incurred by using it.

28 July 2016
Version 2.5

Monday, 23 November 2015


In the first five years of new state pension between 45,000 and 60,000 new pensioners (2% to 3% of the total) living in the UK will get no state pension due to having fewer than ten years of National Insurance Contributions. 

In addition to those living in the UK, a further 30,000 to 40,000 people living overseas who reach state pension age in the first five years of the new State Pension will be caught by this rule and get no state pension. That is about one in five UK overseas residents who reach state pension age in that time.

Under current rules people in the UK or abroad who have paid at least one year of National Insurance and who reached state pension age from 6 April 2010 get 1/30th of the basic state pension for each year paid, which is around £200 a year.

By 2040 it is estimated this new rule, which will deprive up to 20,000 people a year of any pension, will be saving the Government £650m a year.

It is reasonable to suppose that the majority of those who get no pension will be women. They will suffer twice as under new State Pension rules they will not be entitled to a reduced pension on their spouse's contributions. Under the current rules they could claim £69.50 a week on their spouse's contributions if their own entitlement was less than that amount.

These figures from the May 2014 Impact Assessment (para.95) are approximate. No breakdown into men and women is available and the Government has refused a Freedom of Information request for them - see below. I have asked for a review of that decision. 

Thursday, 19 November 2015



Millions of women had their state pension age delayed - in some cases twice and by up to six years in total - without proper notice.

That is the only conclusion to be drawn from the details of how they were informed of the changes which has now been obtained from the Department for Work and Pensions. It reveals
  • The Government did not write to any woman affected by the rise in pension ages for nearly 14 years after the law was passed in 1995.
  • More than one million women born between 6 April 1950 and 5 April 1953 were told at age 58 or 59 that their pension age was rising from 60, in some cases to 63 
  • More than half a million women born 6 April 1953 to 5 April 1955 were told between the ages of 57 and nearly 59 that their state pension age would be rising to between 63 and 66.
  • Some women were told at just 57½ that their pension age would rise from 60 to 66. 
  • Women were given five years less notice than men about the rise in pension age to 66
  • The Government now says that in future anyone affected by a rise in state pension age must have ten years' notice. None of these women had that much notice nor did the men affected by the change.
Rising age
The first increase in women's state pension age was introduced by the Pensions Act 1995. The change would not start until April 2010 and would take ten years to complete. By 6 April 2020 women's state pension age would have been 65 and equal to that of men.

There was little mention of this momentous change at the time - perhaps because the process would not start for 15 years and it would be 25 years before women had the same state pension age as men. A press cutting search by me of the 1990s found very few mentions of the pension age increase and those were almost exclusively in the business and money pages of broadsheet newspapers.

However, more detailed research by Financial Times Pensions Correspondent Josephine Cumbo found more mentions of the rise. She sent her research to the Select Committee. It is not clear how easy to find or understand most of these pieces were nor how clearly they explained the impact on the women whose pension age would be put off by five years. Some examples were given by the Select Committee in its March 016 report Communication of State Pension Age Changes.

Certainly many women did know about the changes. But very many did not. The women affected were then aged 40 to 45. It is understandable that many of them, even if they read the newspapers, would have put it in the 'too far away to worry about' box.

In newly obtained Freedom of Information answers the DWP claims that it placed "advertorials" in women's and TV listings magazines in 2000. It also claimed there was a press advert "specifically about the equalisation of state pension women's magazines and national newspaper supplements". But when asked for details of these adverts the DWP refused to do so. It admitted it "may hold" this information but finding it would cost more than £600 so it was entitled not to provide it. It also says the change was mentioned in some leaflets produced in the early 2000s.

But its crucial and damning admission is that it did not write a letter about the change to any woman affected for nearly 14 years after the Act was passed.

Writing a letter is not of course the same as informing people. The DWP admits that it could only write "using the address details recorded by HMRC at the time" and that the mailing was "subject to the accuracy of their address details with HMRC". Even those which did reach the correct destination may not have been read - "more bumph from the government" is a common reaction to such things.

Many women involved in the campaign group Women Against State Pension Inequality (WASPI) have told me they have never received a letter about changes to their state pension age even now. Many found out from friends relatives, work colleagues, or the media. Many learned about it through Facebook or Twitter.

One reason for that may be revealed in a new global study of data quality expected to be published shortly. I have been told by sources close to the report that 23% of customer or prospect data - including names and addresses - contains errors. That does not mean that nearly a quarter will not arrive. But it does show that sending one letter is the beginning of informing people not the end.

The DWP has now admitted that letters returned undelivered by Royal Mail were destroyed and no further attempt was made to contact the women - see Pension Secrecy Lifted.

Detailed dates
Information released through Freedom of Information requests by WASPI reveals that it waited fourteen years after the law was passed, until April 2009, before it began writing individually to the women affected. 

The first group were 1.2 million women born between 6 April 1950 and 5 April 1953. These women expected to reach state pension age at 60 between 6 April 2010 and 5 April 2013 and were written to in turn by date between April 2009 and March 2011. The DWP figures show that the letters were sent to women when they were 58 or in some cases 59 to tell them their pension age of 60 had been delayed. On average they were given one year and five months notice before they reached their expected state pension age of 60. Some had less than one year's notice; none had more than two.

The letter writing was stopped in March 2011 because the Coalition government was considering speeding up the equalisation of state pension age. Those changes, in the Pensions Act 2011, were finally passed by Parliament on 3 November 2011. The letter writing began again in January 2012.

Second wave
The group affected by the speed up - women born from 6 April 1953 - had not been written to as part of the first wave of letters. They were now included in a second "mailing to individuals...due to reach State Pension Age between 2016 and 2026 [which] was completed between January 2012 and November 2013".

Approximately 650,000 women worst affected by the speed up - those born 6 April 1953 to 5 April 1955 - were written to in January and February 2012.

That means they got their letters between the ages of 57 and almost 59 that their pension age would not be 60. In many cases that would have been the first they knew about the original change and they were now told that their state pension age was to be raised again to just over 63 years and in some cases to as much as 66.

Some of these women, of course, may have discovered themselves that their pension age had already been extended once. For them the letters sent in 2012 arrived only between four and eight years before that revised pension date. It told them that their state pension age was to be extended further by between two and eighteen months.

Worst affected
The very worst affected were the 300,000 women born between 6 December 1953 and 5 October 1954 who faced that maximum extra 18 month rise in their state pension age. We know now that they were first written to about the changes between the ages of 57 years 5 months and 58 years 1 month before they reached 60, giving them just 22 to 30 months to rearrange their lives.

Among that group too some had worked out that their state pension age had already been raised once. They were told between five and half and seven years before their state pension date that a further change would push it another 18 months into the future - in all cases to beyond 65 and for some as late as 66.

It is important not to forget another group some of whom got very little notice that their state pension age would be 66. They are the women born from 6 October 1954 to 5 April 1960. Most of these women only heard about the changes at the age of 56 or 57, two or three years before they expected to reach state pension age at 60. Even the very youngest got no more than six years' notice.

The WASPI campaign covers the women affected born up to the end of 1959. It is seeking transitional compensation - which it has not defined - for the whole group.

Men were also affected by the Pensions Act 2011 which raised their traditional state pension age of 65 to 66. Those born 6 December 1953 to 5 April 1955 were written to in February 2012 when they were 57 or 58, giving them between six years nine months and seven years seven months notice before their 65th birthday. They were informed of a delay of up to one year in their pension age.

DWP wrote to people born 6/12/53 to 5/4/59 about their state pension age rising. Women were told on average 2 years 7 months before expected pension age of 60; men were told on average 7 years 6 months before their expected pension age of 65.

Notice now
The Government's latest plan for reviewing and increasing state pension age was published in December 2013. It set out the principle that people should spend no more than a third of their life adult life (measured from age 20) on the state pension. A review would be held once every five years to work out what state pension age should be. It also promised "The review will seek to give individuals affected by changes to their State Pension age at least ten years’ notice."

None of the individuals mentioned in this blogpost have had ten years' notice. Some have had less than one year. None has had more than eight for the second delay.

The WASPI campaign wants some transitional protection for the women who are the worst affected. On 2 January 2016 its online petition to Parliament has gathered more than 100,000 signatures. At 10,000 signatures the Government must respond. It said it "will not be revisiting the State Pension age arrangements for women affected" after rather disingenuously claiming that "All women affected have been directly contacted following the changes."

The call for some transitional protection was specifically ruled out by Pensions Minister Baroness Altmann on Money Box on 26 September 2015.

WASPI claims that if the MPs who voted in 2011 for the further rise in state pension age had known they were given such short and inadequate notice of the 1995 changes they may well have voted differently. The Bill was passed by 287 to 242 votes after amendments about the changes were rejected by 291 to 244 votes.

Parliamentary debates
The issue has been debated on several occasions in the House of Commons and the House of Lords.

1. It was debated at length by MPs in Westminster Hall, the House of Commons second chamber, on 2 December 2015 led by Barbara Keeley MP. The debate was replied to by junior DWP and Justice Minister Shailesh Vara.

2. A further debate in the House of Commons main chamber was held on 7 January 2016. That was authorised by the Backbench Business Committee.

MPs devoted three and a half hours to debating the issue on the Motion by the youngest ever woman MP Mhairi Black

That this House while welcoming the equalisation of the state pension age is concerned that the acceleration of that equalisation directly discriminates against women born on or after 6 April 1951, leaving women with only a few years to make alternative arrangements, adversely affecting their retirement plans and causing undue hardship; regrets that the Government has failed to address a lifetime of low pay and inequality faced by many women; and calls on the Government to immediately introduce transitional arrangements for those women negatively affected by equalisation.

The Motion was passed by 158 votes to zero. But as a backbench motion it has no force to make the Government act and junior DWP and Justice Minister Shailesh Vara, who responded made it clear there would be no change.

The full debate in Hansard starts at col.454.

3. The matter was raised in Questions in the House of Commons on 1 February 2016.

4. Later that day 1 February 2016 there was a debate in Westminster Hall at 4.30pm. The debate was approved by the Petitions Committee after the WASPI petition was signed by more than 100,000 people. The Motion was

 “That this House has considered e-petition 110776 relating to transitional state pension arrangements for women born in the 1950s”

Helen Jones MP, Chair of the Petitions Committee, moved the motion. No vote was held.

5. Three weeks later on 24 February 2016 Labour used one of its days to get the Commons to debate the matter again. This time the motion was more substantive and "calls on the Government to bring forward proposals for transitional arrangements for women adversely affected by the acceleration of the increase in the state pension age."

The motion was defeated by 289 to 265.

The issues have also been debated twice in the House of Lords.
  • There was a short exchange between Baroness Bakewell and Pensions Minister Baroness Altmann in the House of Lords on 23 November 2015.
  • Baroness Bakewell obtained a short debate in the House of Lords on 3 December 2015. Baroness Altmann responded.

The DWP failed to inform millions of women about the changes to their state pension age until a year or two before they were 60. It gave inadequate notice to those affected by the further extension of their pension age leaving it to between four and eight years before that further rise was implemented. In many cases those women did not know then that their pension age age had been increased once already.

More information 
WASPI on Facebook
The WASPI petition
WASPI on Twitter
Pensions Minister Baroness Altmann on Money Box
Pensions Minister responds to Baroness Bakewell in House of Lords
Official site to calculate your state pension age

Sources: DWP Freedom of information VTR3902 (5 October 2015); VTR 3439 (8 September 2015); VTR3231 (17 August 2015).

15 March 2016
version 1.75

Monday, 16 November 2015


National Insurance contributions will be going up by an average of 15% for around six million people in April. The lower the earnings the bigger the percentage rise. Technically this does not break the Government’s election pledge – made four times in the Conservative Party Manifesto 2015 – that “we will not raise VAT, National Insurance contributions or Income Tax”. The Treasury told me that the pledge only applied to main tax and National Insurance rates and in any case this increase had been announced by the previous government and so was outside the pledge.

The rise is part of the introduction of the new State Pension. From 6 April new contributions to State Second Pension (S2P or as it used to be called SERPS) will end. So no one will be able to ‘contract out’ of S2P in favour of their own pension at work. Until April those who do contract out of S2P get a rebate of 1.4% off their National Insurance contributions (NICs) bringing them down generally from 12% to 10.6%. (NB the exact calculation is complicated - see Note for Nerds below). When S2P disappears in April so will the rebate. 

The people affected all pay into a final salary (or career average) pension – nowadays called ‘defined benefit’ or DB schemes. These have been cut back by employers in recent years and around one million workers employed by about 2500 private sector firms pay into one. About 5 million do so in the public sector.

How much?
The rebate is 1.4% of a band of earnings between £112 and £770 and when it ends someone on average earnings of £25,000 will pay an extra £5.16 a week in NICs. That will put up their net weekly contributions from £33.93 to £39.09 an increase of 15.2%. Someone on minimum wage will see their NICs rise from £11.38 a week to £13.56 – an increase of £2.18 or 19.2%. The £2.18 extra NI will take them 20 minutes to earn.

The maximum NI rise is £479.02 a year (£9.21 a week or £39.92 a month) which applies to anyone earning more than ££770 a week or £40,040 a year.

The change will wipe out the 1% pay rise scheduled for many of the 4.5 million public sector workers from April. Anyone with current gross pay of £22,436 or more will end up worse off. For example, someone paid £30,000 a year will get a pay rise of £300. They will gain from the change in the personal tax allowance leaving them paying £20 less tax in the year. But the extra £36 NI on their pay rise and the loss of the £374.46 contracted out rebate will leave them £54.46 a year worse off despite the pay rise. That is a cut in their net pay of 0.23%.

Someone earning £15,000 gross will get a pay rise of £150 a year and pay £50 less tax. But the NI rebate loss and their higher pay will see NI contributions rise by £146.46. So they will keep just £53.54 of their £150 pay rise. That is a rise in their net pay of just 0.4%.

The biggest loss will hit someone earning £40,040 a year. They will get a pay rise of £400.40 but will end up £126.68 worse off - a cut of 0.41% in their net pay. Above £46,059 a 1% pay rise would lead to a net gain in pay.

These calculations do not take account of pension contributions or any changes which may be due in them from April.  Nor do they take any account of benefits or tax credits.

Will it change?
These calculations are based on 2016/17 NI rates and thresholds announced on 25 November 2015. Normally the lower thresholds go up each year with CPI inflation. As that is around zero there was no change. So the prediction I made some weeks ago remains – National Insurance for 5.5 million people is going up in April by an average of 15% compared with what it would have been if the new scheme had not been introduced.

Employers too
The change will not just affect employees. It will also mean higher NI payments by employers who have a contracted out salary related pension scheme. The rebate is currently 3.4% off a standard 13.8% rate. That will end from 6 April and employers will face a rise in the NI they pay on average salaries of more than one third. Private sector employers can make changes in the pension scheme to recoup the cost of the rise in NI contributions by reducing scheme benefits or increasing employee contributions. They can do that without consulting scheme trustees using what is called a 'statutory override'. To find out more search that term in Google. Some have already said they will do that. Employees of British Airways have told me that it will recoup the whole extra NI cost by raising their contributions inn its pension scheme, costing them about £100 a month. 

Public sector employers however must bear the cost. The Treasury estimates (p.64 line 18 in table 2.1) it will add £3.3 billion in 2016/17 to the pay bill of the whole public sector. The NHS Confederation in particular expects the NHS in England and Wales to face £1.1 billion a year in extra expenditure. The Local Government Association estimated the change would costs local authorities in the Local Government Pension Scheme an extra £700 million a year. 

The Government says that the rise will be more than paid for by the higher rate of state pension which is earned. Every year of National Insurance which is paid will earn almost £4.45 a week in new State Pension compared with £3.97 a week under the old (current) system. But even that is only true until the full new state pension is reached, normally after 35 years contributing under the new system. After that there could be another 15 years or more paying National Insurance and gaining nothing. In that sense NI is just a tax on earned income. And for six million it is going up in April.

Note for nerds
The main standard rate of National insurance is paid on a band of earnings from £155 to £815 a week. But the contracted out rebate of 1.4% is calculated on a different band from £112 to £770 a week. Don’t ask! That complicates the calculation of the effects. The figures in versions of this blogpost lower than 1.50 understate the effect.

A shorter version of this blog was first published in the Money Box newsletter for 23 October 2015. Subscribe to the newsletter.

28 March 2016 
version 1.75 earlier versions may contain inaccuracies

Monday, 9 November 2015


The great thing about déjà vu is that if you wait a year or two it happens again.

The FCA wants a 'shopping around point' to make sure that customers are not sold poor value drawdown schemes when they exercise their pension freedom. 

Here are the eleven occasions from 2001 to 2014 that the Association of British Insurers promoted 'shopping around' to ensure people got a better annuity deal. They all failed.
  1. 8 August 2001 ABI Code of good practice on pension maturities. Tell customers they can shop around.
  2. January 2006 ABI issues a revised statement of good practice on pension maturities. Tell customers more clearly they can shop around.
  3. 10 July 2008 Improved customer information “highlights the potential benefit of shopping around”.
  4. 26 May 2009 ABI guide: People Need Pensions. Includes information on the importance of shopping around.
  5. 17 January 2011 ABI publishes a new guide – to help customers shop around.
  6. 20 December 2011 Consultation on providing a statement on benefits of shopping around.
  7. 7 November 2012 Consultation on annuity rate transparency to help people shop around.
  8. 5 February 2013 – ABI publishes – a guide to shopping around for retirement income
  9. 1 March 2013 – Code of Conduct on retirement Choices includes publishing the information people need to shop around.
  10. 21 August 2013 – publishes specimen annuity rates to give some idea of the benefits of shopping around.
  11. 10 March 2014 – ABI Minimum standards including A Conversation, A Comparison of quotes, Health and lifestyle information – oh and shopping around.
The regulator was no better. More than a decade spent relying on customers shopping around to do its job for it. 

  • August 2001 FSA Buying a pension annuity disclosure must say “by shopping around policyholders may get a better deal."
Twelve and a half years later
  • 1 February 2014 FCA Thematic Review of AnnuitiesChapter 2 The benefits of shopping around.
These plans were all put out after evidence revealed - if you can reveal the same thing a dozen times - that people were getting the wrong annuities and, guess what, they were the most profitable ones for the firms that allowed customers to drift into buying them.

After more than a decade of failure by the pensions industry to avoid widespread mis-selling of inappropriate annuities, George Osborne cut through the Gordian knot and announced pension freedoms in his March 2014 Budget. That happened just after the latest doomed attempts to promote that empty journalistic trope 'shopping around'.

Instead of innovation, the industry has just replaced expensive annuities with drawdown which comes with no guarantees and is often even more expensive.

So instead of mis-selling of annuities we have blanket 'non-advised' selling of expensive drawdown products.

And now the regulator wants 'a shopping around point' to solve the problem of expensive drawdown, as this report shows 

'Speaking at the Westminster Employment Forum in London last week, FCA director of competition Mary Starks said: “We’re very conscious that if we see a significant increase in  people not moving around in retirement, and in buying drawdown from existing providers we will have to look very hard at how we can make comparisons easier and step in to break the link between the provider and the retirement phase by prompting a shopping around point.”' (Money Marketing 9 November 2015)

Wow. A shopping around point. Something that didn't work in 2001 (twice), 2006, 2008, 2009, 2011 (twice), 2012, 2013 (thrice), or 2014 (twice). Now retrod for 2015 by the regulator. The financial firms will earnestly agree and nod wisely while they grin from ear to ear.

This time it is not a mis-selling scandal but a mis-buying one as financial firms carefully distance themselves from offering anyone advice. 

So ultimately those exploited will be blamed. And the pensions industry will be left alone to count its profits.

9 November 2015
vs. 1.00


Up to three million married couples and civil partners are missing out on a new tax allowance that is worth £220 this year and £230 in 2017/18.

The Marriage Allowance allows a spouse (or civil partner) to transfer up to £1100 of their 2016/17 tax allowance to their partner if 
(a) their income is below the tax threshold (currently £11,000 a year) and 
(b) their spouse does not pay higher rate tax which begins on incomes above £43,000 a year. 

Both must also be born after 5 April 1935 because older couples get a bigger tax break - see Marriage Tax Breaks.

The latest figures show that 1.4 million have claimed it successfully leaving 2.8 million eligible couples who have still to claim.

How it works
If a couple qualifies then the non-taxpayer can transfer £1100 of their unused personal allowance to their spouse. That will save the taxpaying spouse basic rate tax on that amount which is £220 a year (£18.33 a month).

The future
In future years the Marriage Allowance will rise. It is fixed at 10% of the personal tax allowance. So it will be £1150 in 2017/18 then on present plans £1250 by 2020/21.

Claiming and payment
You can claim the allowance online or through the income tax helpline 0300 200 3300. You will need National Insurance numbers and dates of birth for you and your spouse. Lines are open 0800-2000 Mon-Fri or 0800-1600 Saturday. You can also claim by sending a letter with your details to Pay As You Earn, HM Revenue and Customs, BX9 1AS. That might take longer.

Once the transfer is done the spouse receiving the extra allowance will have a suffix M added to their tax code The one making the transfer will have a suffix N and their tax code will be lower. 

It will be backdated to the start of the tax year and then reflected in a reduced amount of tax each month. If you qualified last tax year you should claim for that too. That rebate of £212 will be paid by check or bank transfer. 

HMRC says that the process is now simple and quick and that is confirmed by many on my twitter timeline who have successfully claimed the allowance. 

The transfer can only be for the full amount of £1100. That can be done even if the person transferring the amount has an income close to their personal tax allowance. So someone with an income of £10,500 who is a non-taxpayer can transfer the full £1100 leaving themselves with a personal allowance of £11,000-£1100=£9900. So they will start being a taxpayer and pay basic rate tax on £10,500-£9900=£600 ie a tax bill of £120. Their spouse will save £220 leaving the couple £100 better off.*

HMRC has confirmed that people can also claim the Marriage Allowance if they both pay tax at the basic rate. However in that case they will not be better off as a couple. One will pay less tax, the other an equal amount more. The online claim allows the claim to be made. If you call the helpline they should point out that you will be no better off before allowing it to go ahead.

The Marriage Allowance is only available to married couples and civil partners. It is not available to couples who are not married or civil partners.

If either partner was born before 6 April 1935 then they cannot claim Marriage Allowance because they can claim the higher Married Couple's Allowance. More in Marriage Tax Breaks including allowances for older couples and blind people.

The information and explanations in this blogpost are broadly correct. Accountants will tell you things are not quite that simple and some claim that HMRC is not implementing the law accurately. However, I believe the information here is as accurate as it needs to be and can be relied on by the vast majority to make a successful claim. There is more information about some of the fiddly bits in Marriage Tax Breaks. But they will not be relevant to the vast majority of readers.

30 January 2017
vs. 2.2