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
