Labour’s new pension plans face ‘serious practical problems’

Hannah Godfrey writes

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 on Monday 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 (pictured) 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’

AJ Bell senior analyst Tom Selby echoed Webb’s thoughts and argued the policy proposal seemed more like Labour “playing to the pensions gallery” than a “serious long-term reform plan”.

He added: “Indeed, many of the women affected by state pension age equalisation will already be in there 60s so, even if Jeremy Corbyn were to get the keys to Number Ten the extent to which those most affected would benefit is shrinking all the time.”

Last month Labour embarked on a national ‘state pension tour’ which has seen Abrahams visit groups and individuals across the UK to discuss the future of retirement.

The tour came after the Conservative party’s confirmation it would implement changes to the state pension age outlined in the Cridland report, which will see it rise to 68 between 2037 and 2039.