I’ll start by declaring an interest. I’m a 51-year old woman, and so far in my working life I’ve seen my State Pension age rise from 60 to 65 and now, in the Pensions Bill, up to 66. So I’ve been looking at the history and the arguments surrounding the proposed changes.
When the contributory State Pension first began in 1926, men and women both had a State Pension age of 65. Life expectancy in the early 1920s was less than 65.
It was the Old Age and Widows Pensions Act 1940 which lowered women’s State Pension Age from 65 to 60. Debates at the time suggest that one of the reasons was that women’s domestic responsibilities on top of their paid work were felt to leave them ‘tired’ at 60, and there was also the perception that women were economically dependent on a husband and that he would be approximately five years older.
Can you imagine what would happen today if there were a Bill today that created such an inequality and what an outcry there would be?
As “women’s lib” grew throughout the 1970s and 1980s, campaigners tried to get the ages equalised without success. It was only in the 1995 Pensions Act that steps were taken by then Chancellor Ken Clarke to equalise men and women’s pension ages at 65. A timetable gradually increased women’s State Pension age from 60 to 65 between 2010 and 2020.
The effect of an early state pension age was generally unhelpful to women’s prosperity in retirement. With five years less to accumulate a pension and a higher propensity to have career breaks, women who retired at 60 often did not have the full state pension or a full occupation pension. Women have always had a longer life expectancy. As a result of these and other factors, pensioner poverty today for women is worse than for men.
The Pensions Bill proposes to close the gender gap in State Pension age by 2018, rather than 2020. Women should still receive their State Pension for longer than men, on average. Career breaks and time as carers can be allowed for, so that by late 2018 over 90 per cent of both women and men reaching State Pension age are likely to have built up a full basic State Pension.
The recent Commons debate on the State Pension age highlighted the fact that even the 1995 changes are still news to some women. Age Concern did a survey of women whose state pension ages are rising and found that more than one in five were unaware that they would no longer be able to draw the State Pension at 60.
Another remarkable statistic is the speed of the advance in life expectancy. In 1940 a woman retiring at 60 could expect to live until she was 78.3 years old. This year, a woman retiring at 60 can expect to live until she is 88.9. That’s a 58% increase, most of which has happened since 1995.
More and more people are living until they are 100. By 2020, 13.6 million of the population will be expected to reach 100, two million higher than last year.
Governments have a choice about the State Pension. They can provide a better State Pension by increasing the State Pension Age or can keep the State Pension Age the same and allow the pension itself to shrivel in real terms.
This Government, led by the immensely capable Steve Webb as Minister for Pensions, has made a clear choice. The State Pension will be simplified and increased in real terms using the “triple lock” of higher of 2.5%, RPI or earnings. People will be encouraged to save more for their old age by ending the deterrent of means-testing. A simple workplace pension will be provided for the millions of smaller accounts needed by those on lower earnings through NEST.
Some have argued that seven years is not enough time to prepare. The Secretary of State will look closely at transitional help, but these steps taken together are the best preparation for more women to enjoy financial dignity in old age.