Why some women will have to wait to get their full state pension
And women in particular could be facing financial hardship as a result of a “birth date pensions lottery”.
For generations, men have been able to access their state pension at the age of 65, while women received their entitlement at 60. But this has changed due to equalisation with both men and women set to receive their pension at 65 and the age for everyone gradually rising in the coming years.
While most people have welcomed equalisation, there is concern about the ‘birth date pensions lottery’ which means a lot of women born in the 1950s could be placed in a financially vulnerable position,
This is as a result of then-Chancellor George Osborne in 2011 announcing that the timing of legislation drawn up by earlier Conservative and Labour Governments to increase the pension age was being brought forward.
Bob Hair, wealth planning director and head of Edinburgh office at Cazenove Capital, explains the “birth date lottery” for women born in the 1950s.
He says: “If you’re a woman who happened to have been born in 1954, you’re now retiring aged 65, eight months and five days. That means you’re not retiring until 2020 which is six years later as a result of the equalisation. That’s why it’s a birth date lottery.
“A lot of women in their 60s today will not necessarily have worked for their entire career or have been in full-time employment, for example due to child care commitments, so will not be entitled to a full state pension and now they will have to wait longer for it.”
Millions of women got little notice of the higher pension age being introduced earlier. While the Women Against State Pension Inequality (WASPI) voluntary organisation launched in 2015 agrees with equalisation it is campaigning against how it was introduced. In particular, it has concerns over the lack of notice given to women that they would need to wait longer for their pension.
WASPI wants a ‘bridging’ pension to provide an income to fill the gap and compensation for losses for those who have already reached state pension age.
Susan Beevers of WASPI says: “Some 3.8 million women were affected by a lack of notice of the increase in the state pension age and about half a million women never received any notification. Women tend to be more reliant than men on state pensions – they might have worked part time – and the financial impact of these changes on women is significant.
She says WASPI is making excellent progress with many MPs on board, but the government is taking a long time to react and the complaints process is slow.
According to Hair, women might have to continue to work for longer or save harder to raise capital to fill the gap before their state pension kicks in. He advises women to check their state pension entitlement to see if it is worth topping up their National Insurance record to get the full amount.
He also says that people approaching retirement should not regard it as too late to set-up a personal pension as it could be beneficial in terms of income tax.
The first 25 per cent of pension money can be drawn tax free.
He says: “State pension can be a really valuable building block so don’t forget about it. Get a forecast so you know where you stand, when your pension is payable, whether there is anything you can do to top it up and whether you can delay claiming your pension.
“It’s quite a big jump if you don’t take your pension from one year to the next. You can actually roll it over and that can be quite attractive in certain circumstances.”