The Law Of… planning for retirement at a time of change
Chair of the Parliamentary Work and Pensions Committee, Frank Field, has spoken out against Government changes to the State Pension Age (SPA), with claims that changes could leave some women £40,000 out of pocket.
Responding to the latest developments, Nicola Hartley – Independent Financial Adviser for Simpson Millar Financial Services – examines pension changes and outlines some advice for women affected by Government policy.
Speeding Up Changes
The so called ‘pension age trap’ has been caused by changes introduced in the Pensions Act 1995, which have been protested by trade union groups and the Women Against State Pension Inequality (WASPI) campaign group.
The Act outlined a phased increase to the state pension age for women, with proposals made to increase the state pension age for women from 60 to 65 between 2010 and 2020.
Problems have arisen since the coalition government of the last parliament voted in changes to speed up the increase of the state pension age for women.
The women’s state pension age is now set to increase to 65 between April 2016 and November 2018, with a final jump to 66 coming in by October 2020.
The changes have left many women born in the 1950’s at a disadvantage, with some reports claiming that women are left with no alternative but to sell the family home, go without daily essentials, or rely on family members to help top up income, all because they are not receiving the entitlement to the state pension from the age that was initially confirmed to them.
Inability To Plan For Retirement
Such radical changes in state pension age, over such a short period of time, has left many women feeling wronged, as previous retirement plans have been scuppered by Government policy.
Many women affected by the changes have claimed that they were not informed of any changes and many female members of the workforce that have been expecting their state pension when they reach the age of 60 have been surprised to hear that the age they will qualify has increased by up to 6 years.
Women affected by the original proposals in the Pensions Act 1995 were not contacted about the changes until 14 years after legislation was passed, which was a year before the phased increases were set to begin.
Typically, plans for retirement are formed over decades of an individual’s working life and alterations to the state pension age so close to them actually coming into effect significantly affects the income that individuals will be in receipt of, thus changing their plans.
Commenting on the changes to state pension age, Nicola says:
“The continual upwards trend of the state pension age is deeply unfair – if these changes had been made by a private pension provider or life company within the financial services industry they would have been reprimanded by the regulator for failing to honour a binding contract.”
“The only plan that the government has implemented to tackle the increasing aging population and state pension bill appears to be to escalate state pension age.”
“This is a deeply unfair move for those that have paid tax and national insurance over the course of numerous decades and have then seen the goalposts moved significantly with little warning.”
“I would recommend that everyone check their state pension age using the government’s free online calculator, so that they are aware of any changes to their state pension age as early as possible.”
“Unfortunately this move, coupled with the introduction of the single tier state pension on the 6 April 2016, has further complicated matters. Some individuals are now unsure not only of when they will receive their state pension, but of the actual amount that they will become entitled to. These two elements are key in planning for retirement and I would recommend that as many people as possible seek professional advice.”