Women’s pension rights: are the changes fair or not?
Have you heard?
Changes are being made to the State Pension age. Specifically, the age at which women can receive the State Pension is changing to be the same as men, then both will rise together in line with life expectancy.
Great! That’s another victory for equality, isn’t it?
Well, maybe. But don’t light the celebratory fireworks just yet, and put that cork back in the champagne bottle.
As women no longer receive the State Pension at 60, millions cannot retire until up to six years later than they had planned for. In response, groups like WASPI (Women Against State Pension Inequality) are trying to have the changes amended.
It’s a tricky area, though; not least because lots of other people thought women retiring five full years earlier than men to begin with was anti-equality favouritism, especially as they typically live longer, too.
With opposition on both sides, you’re probably thinking that changes are inevitable and there will always be winners and losers. And that’s undeniably true. In this instance, though, could inequality actually be fairer?
Let’s take a look…
What most people don’t know
We all take the State Pension for granted these days, as something we earn the right to by paying into the system. And while that’s true, it wasn’t always that way – so bear with me for the boring bit. State Pension history isn’t the most exciting topic but to know where we are – and where we’re going – we need to know where we’ve been, so hang tight for a quick recap.
The State Pension was introduced in 1908 and it was vastly different to what we have today:
- 25p a week was paid to people from the age of 70 with an annual income of up to £21, tapering to nothing for people who earned £31 a year.
- The life expectancy at the time was around 50; people who reached 70 were only expected to live another nine years.
- A ‘character test’ had to be passed – anyone who had been to prison or refused work when able did not receive a State Pension.
What’s that? The State Pension age was higher than today, at a time when life expectancy was much lower?
That’s right, when the State Pension was introduced you were lucky if you received it for a decade. It’s a different situation today: if a person lives to be 100 they will have received it for a quarter of their life, and in 2012-2013 the cost was £94 billion (including the winter fuel allowance and pensions credit).
So when did it change?
Changes were afoot in 1925:
- Employer and employee contributions were introduced.
- Means-testing was scrapped and the age lowered to 65.
- A higher rate was introduced for married couples.
There was, however, one catch: both spouses had to be at least 65 to receive the married couple’s rate. The consequence of this was many men waiting years for their wife to turn 65 before they could get the higher amount.
Then, in 1946 the official State Pension ages were set at 60 for women and 65 for men – and they stayed that way for almost 70 years. Think about that for a second: that legislation is so old that if it were a person, it could claim the State Pension! And believe it or not, the life expectancy at the time was 64 for women and 59 for men – so the expectation was women would receive the State Pension for four years and men wouldn’t receive it at all.
So women were more advantaged than men?
Not necessarily. It’s easy to forget just how much society has changed in the past few decades. Although young men and women today may be operating on a more equal footing, that wasn’t always the case.
When National Insurance was introduced it reflected the values of the 1940s, particularly that women relied on their husbands and didn’t need to look after themselves. As such, many married women were able to pay reduced rate National Insurance contributions. This meant they could receive maternity allowance and industrial injuries benefit, but not their own State Pension. And the big problem is, a lot of the women paying this reduced rate were not made aware of its limitations.
Fast forward to today, and you have a very large number of women who don’t have the right to claim a full basic State Pension at all. Instead, they can only receive an equivalent of 60% of their husband’s State Pension.
Essentially, the women affected by the recent changes were operating under different rules and there’s a valid argument that they should be taken into consideration, instead of the government moving the goalposts as it sees fit.
Surely these changes are unfair, then?
It’s really more complicated than that, partly because the disadvantage women had in the past doesn’t really justify why they should retire so much earlier than men. Unequal retirement ages did make sense when both husband and wife had to be retired to receive a higher rate pension, but that isn’t the case anymore. The truth is, policies have changed a lot over the years yet the State Pension ages have remained the same.
Governments have also received a lot of criticism for allowing women to retire five years earlier than men, particularly as they are also likely to live longer. Even though men probably spent more time in the workforce and paid more National Insurance than women, they could receive significantly less from the State Pension.
And don’t forget that although changes can be difficult, there is no contract between the state and the public concerning the size of the State Pension nor when it will be paid. While changes may be considered unfair, the government is allowed (and should arguably be expected) to make them.
After all, sometimes changes are necessary. The State Pension is more inclusive than ever before, but also significantly more expensive. Is it fair to expect our children to foot the bill for the increasingly expensive State Pension, when they are already struggling to pay for today’s cost of living? Will they even be able to claim a State Pension of their own in the future, or will it be restricted or scrapped entirely thanks to being unaffordable?
The simple truth is 70 years is a long time for something to stay the same when so many other things have changed. Yet because no decision can please everybody, the government is stuck between a rock and a hard place.
These changes are particularly difficult, too. Lots of people rightly point out that the increases to the State Pension age were announced in 1995, so enough notice was given to plan around them. But as they affect a group who, largely, earned less over their lifetime than men or did not work at all, how realistic is it to demand they find the money to cover the gap between their original and new retirement ages themselves?
Is it even reasonable to make drastic changes to policies when people are already planning around them, rather than introducing them for people who are now operating on a more equal footing?
What do you think, are these changes right or is there another option that could be considered?
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