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Pensions and politics
Labour's new pension plans face 'serious practical problems'.
Labour is set to reveal plans for women born in the 1950s to access a reduced state pension at the age of 64 - a move former pensions minister turned Royal London director of policy Steve Webb said faced "serious practical problems".
Shadow work and pensions secretary Debbie Abrahams is expected to announce the plans at the Labour party conference in Brighton. Labour has described the proposal as "cost effective in the long run" and said it should be implemented "immediately".
Former Liberal Democrat MP and pensions minister Webb said, however, the idea was fraught with problems. "Writing new primary legislation, getting it through Parliament, and implementing the change on the ground is likely to take at least two years," he said. "If the legislation completed its passage through Parliament during the 2018/19 session it would take at least another year to change government computer systems and to communicate effectively to all those who might be affected." He added: "By the time the new law could be implemented, most of the women who had the shortest notice of the state pension age changes would already be drawing the state pension."
Furthermore, said Webb, because of equality legislation it was unlikely the new option could be made available only to women, and there were "serious practical problems" with allowing people to opt for an early pension that was permently paid at a lower level than the full state pension. "For example, if the scheme is to be cost-neutral, they would not be allowed to claim pension credit or other benefits to top up their low income," he explained. "But if they could not do so, then they could be living permently below the poverty line throughout their retirement."
Changes to the state pension were introduced under the 1995 Pension Act, which set out to equalise women's state pension age with that of men's, at 65 years old.
The campaign group Women Against State Pension Inequality (WASPI) has argued, however, that women had little notice or were unaware entirely they would not receive a pension at 60, and were therefore unprepared for retirement.
'Playing to the pensions gallery'
It seems to me that the hot topic of changes to state pensions is being used by many politicians as a vote winning tactic far too often with little thought of serious long term reform.
People who are now in their 50’s and who have been contributing to a pension for 25 years or more have seen around 5 significant changes to legislation in that time, for most people this has led to a complicated and uncoherent set of plans and polices that need simplification rather than further confusion by way of further changes to the state pension.
It is my view that a well-structured and personalised financial plan in retirement is needed by all of us to ensure that any legislative change has minimal impact on our long term financial wellbeing.
If you would like guidance or advice on your own pension planning needs, please contact Adam on 01603 666132