What's not to like in the Coalition's new flat-rate pension?
Quite a bit, unfortunately, especially if you are a woman of a certain age. Pensions Minister Steve Webb looked ridiculously pleased with himself, presenting this new baby in the Commons on Monday. In the bad old days, he reminded MPs, it used to be said that while a man needed a pension, a woman needed a husband. Now women will get equal treatment and the new system will be as simple as counting to three. It's certainly simpler, which is a relief, and for those expecting around £107 a week from the state retirement pension, £144 looks like a (modest) fortune. Is this the same lot that were busy cutting the living standards of the poorest just last week ? For Scrooge, read Santa.
Wait on. Weighed down by CODs (contracted out deductions), Serps (State Earnings-Related Pension Scheme), LELs (lower earnings limits) and indexation, the British state retirement pension is the most complicated as well as one of the meanest in the developed world. Those of us without accountancy degrees quickly glaze over when the subject comes up. So Mr Webb clearly believed that if he grinned broadly enough, we'd all burst into a spontaneous rendering of "For he's a jolly good fellow".
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He went out of his way to stress that this is a women-friendly measure. By and large, he's right. After all, most recently retired male pensioners already get at least £140 but most women don't, because the median Additional State Pension for women is much lower. In fact, nearly one- third of women retiring in 2010 hadn't even accumulated enough Insurance credits to entitle them to more than 60% of the full basic state pension. That's why the change is good news for those millions of women who will be retiring after the introduction of the new flat-rate pension in April 2017.
There's the rub. Speed reading the Government's White Paper, sharp-eyed shadow pensions minister, the Cumbernauld MP Gregg McClymont, spotted a flaw. What about those retiring just before that date? What would happen to the 429,000 women currently aged between 59 and 60 (born between April 6 1952 and 6 July 1953)? Because they are at the tail-end of the transition group in the movement of the women's pension age to bring it in line with men, they will become eligible for their pensions shortly before April 2017, so only qualify for the current rate, while men of the same age will get the new higher flat-rate. Ros Altmann, director general of Saga, has been contacted already by a 59-year old woman who will be caught by this, while her twin brother will get £37 a week more. And this discrepancy in their incomes –nearly £2000 a year– will persist until they die.
It gets worse. Already the same women have been hit by the Government accelerating the timetable for equalising pensions, obliging them to work about four years longer than they were told to expect when they entered the workforce. If only the Coalition had stuck to its promise not to raise the pension age again until 2020, this would not be happening.
Let's be clear. Women like me, born in July 1951, have qualified already for the state pension because we're nearer the beginning of the transition group. We will receive 10% extra pension for every year we defer taking it, which should give us at least £144 at age 65. And we no longer need to pay NI. Meanwhile, women born after July 1953 will get the new flat-rate pension under the terms of this announcement. It's only the ones in between who will suffer this double injustice.
Gregg McClymont raised this issue with the minister on Monday. The minister's reply? "The state pension age is different for men and women and so course the implications are different for men and women", which roughly translates as "You're right, Gregg, but that's just tough."
We're going to hear a lot about the extra burdens that will be placed on those born after 1986. By 2060 a majority of pensioners will lose as a result of the change. But at least younger workers have time to plan and save. Not so women five or six years from retirement. We need a stooshie about this.