Compensating women for the rise in the state pension age is nothing more than ill-thought-out electioneeringby Norma Cohen / November 29, 2019 / Leave a comment
Earlier this week, the Labour Party rolled out what might be described as its most stunning pre-election promise to date; that it would provide compensation to women who have seen their state pension age rise to equal that of men. Its estimated price tag is a whopping £58bn.
While Labour had previously expressed general support for a very vocal group of women who felt wronged by the rise in their state pension age, the latest promise is most explicit. Costings were not included in its manifesto.
However, where Labour is much less clear is in describing the problem this enormous cash windfall is intended to address. Nor is it obvious, despite complaints from two vocal groups of campaigners, that there is any widespread political support for Labour’s plan to address it.
Campaigners generally belong to one of two groups. The first of these is Women Against State Pension Inequality (Waspi), which wants those who are having to wait to up to age 66 to draw a pension to receive the full amount they would have drawn as a compensation payment. The second group, BackTo60 (BT60) wants compensation paid and the increases in pension age reversed. That group brought a case against the Department for Work and Pensions to the High Court, which was dismissed on all counts earlier this year. The DWP estimates that meeting that demand would cost £181bn.
In announcing the aid, John McDonnell, shadow chancellor, described parliament’s 1995 Act to gradually raise women’s state pension ages to 65 from 60, in line with those of men, as an “historic wrong.” The increases began in April 2010. The intention to raise women’s pension age had first been announced in 1993 and had been debated since the 1980s. Roughly a quarter century has now passed since the plan was first unveiled. In explaining the move, McDonnell said that women had “insufficient time to prepare for it.” Some, he went on to say, suffered poverty as a result.
There were very good reasons to raise women’s state pension ages, aside from gender equality. Women are living far longer past their 60th birthdays than they did in 1940, when the age was cut from 65. The English Life Tables, measures now published every ten years, show that while UK women on average could expect to live 15 years beyond the age of 60 in 1930-1950, that rose to 22.4 years by 2012. That represents a 50 per cent increase in the number of years in which women will draw pensions and an increase in cost on a similar scale. Daniela Silcock, research director at the Pensions Policy Institute, told me that there is really no alternative to raising women’s state pension ages if the old age benefit is to be fiscally sustainable. Even with rises in SPA announced so far, the ratio of retirees to working age people will rise significantly by 2040, according to ONS projections. For every 1,000 people of working age, there will be 340 people of retirement age, up from 300 today. That means higher taxes on tomorrow’s workers.
The increasing wealth of older Britons has not prevented the term “suffering” from entering the lexicography employed by Waspi and BT60. But official data firmly contradicts the picture of a suffering population. Some 96 per cent of retired households have disposable incomes of over £10,000 after accounting for inflation, up from around only a fifth in 1977, according to the ONS. Moreover, the incomes of the retired have grown much more rapidly than those of younger households. The mean gross income of retired households has trebled over the 40 years from 1977 to 2017 while that of non-retired households has doubled.
In recent years, the increase has been even more stark, with median retired persons’ household income growth up 66.2 per cent since 2004, compared with a rise of 38.8 per cent for non-retired households.
Nor is it at all clear that most women were unaware that state pension age would rise. In fact, studies suggest the opposite. A 2004 study commissioned by the DWP found that 59 per cent of women knew that the SPA was rising and among those aged 55 to 64, three quarters knew about the rises. Indeed, despite claiming to speak for 3.8m aggrieved women affected, the campaign groups appear to represent a small fraction of this group. Waspi figures, for example, show under 111,000 followers on Facebook and a further 93,000 on Twitter, totalling slightly more than 5 per cent of affected women. BT60 claims it has 723,500 “supporters” but even then, that is roughly a fifth of affected women. Thus, even if most women did not like to wait longer, they appear to have accepted the change.
John Ralfe, an independent pensions consultant who has long been critical of Waspi and BT60 demands for compensation—and of the Labour Party’s previously vague support for it—describes the new package unveiled last week as “regressive.” That is, too much goes to those who clearly do not need it. The one group deserving of a roll back are those affected by 2011 legislation which gave a very short period of notice for a one year rise in SPA, going to both men and women, he said. Labour, however, is not proposing to compensate men for the sudden rise, a move Ralfe speculates could give rise to legal claims of gender discrimination by men.
How, then, should Labour’s new pension policy be interpreted? It offers cash to those who demonstrate no clear need of it and who are, in most cases, capable of earning it on their own. One way to look at this promise is that it is in line with the habitual posturing that comes before a national election, in which political parties promise generous goody-bags to groups whose support they seek regardless of whether it is good or affordable policymaking. In a difficult election year, it is difficult to come up with a more coherent explanation.