EVERYONE nearing retirement needs to know when their state pension will start so they can plan their later life income. But there have been so many reforms of the state pension recently that millions of people are completely confused. Judging from my email inbox, there is an urgent need for the Government to clarify what is happening.
As life expectancy increases, the state pension age needs to rise. But the Government has failed to recognise how hard it is for ordinary people to cope with all the changes it is imposing. In fact, the Chancellor recently expressed his delight with these reforms because they save so much money. Naturally, increasing state pension age saves significant sums, as millions must wait longer before their pension starts, but for many this is causing real hardship. Surely Ministers should be sensitive to the damage done to older people’s lives?
Those facing the biggest changes are women in their late fifties. Under reforms decided in 1995 their state pension age was due to rise from 60 to 65 between 2010 and 2020.
However, despite the Coalition Agreement promising that no further changes would be made to women’s state pension age before 2020, a second increase was imposed on women already in their late fifties starting in 2016.
For public sector pensions, the Government said it would be unfair to change pension ages for anyone within 10 years of their expected pension date. Clearly, this notion of fairness has not been applied to the state pension.
The coalition seems oblivious to the problems faced by those already in their late fifties, particularly women, who feel they simply do not matter to policymakers.
The worst affected are women born in 1953 or 1954, who are now 58, 59 or 60. Men will also face changes, but the state pension age is shifting further and faster for women than for men of the same age.
The mechanics of these changes are so unwieldy that whether someone tells you how old they are, or the year they were born, it is still not possible to say when their state pension will start.
The reforms seem to have been designed without sufficient thought for the actual people trying to engage with them.
Women currently aged 58, 59 or 60 could find their state pension starting at 62, 63, 64, 65 or 66 – depending on their exact date of birth. These women need to check their state pension age very carefully. The best way to do this is via the Department for Work and Pensions’ calculator. It can be found at www.gov.uk/calculate-state-pension. However, many older women do not use the internet, and they really need to have reliable information.
Some will decide they have to keep working to afford the lifestyle they would like, some will not be able to do this but they all need to know when their National Insurance pension will start.
The new rules are ludicrously complex. For example, 60 year-old women born on or before April 5, 1953 will be 62 when they qualify for their state pension, while those born after April 6, 1953 will be 63.
Women aged 59 now, born before August 5, 1953 (but not on July 6) will be 63 when they reach state pension age, while 59 year-olds whose birthday is on July 6, 1953, or between August 6 and December 5, 1953 (but not on November 6), will be 64 and those 59 year-olds born on November 6 or after December 6, 1953 will be 65.
Women and men now aged 58, who were born between May 6 and October 5 (but not on September 6) 1953 will be 65 when they become entitled to their state pension, while 58 year-olds born on September 6 or after October 5, 1954 will have a state pension age of 66.
This changes are so complicated that one has to wonder how the Government can seriously expect anyone to cope with them when they are being imposed at such a pace and in such a confusing manner.
Furthermore, the reforms outlined so far only relate to the period between now and 2020. Yet more state pension age changes are coming for people in their fifties. They need to know now to help them make their retirement plans.
Anyone now aged between 53 and 57 will have a state pension age of 66, but 52 year-olds will reach state pension age at either 66 or 67.
Anyone aged 51 or under (but at least 31) will reach state pension age at 67.
In future, changes to state pension age will be officially linked to rising life expectancy. A commission will be established to advise on pension age increases from 2026. Therefore, it is essential that everyone keeps track of what is happening when making long-term financial plans.
Let’s hope future pension age increases are implemented with more care and less complexity, so that the people who are affected can better understand the changes and the impact they will have on their lives.