March 21, 2016

MPs support women receiving early access to state pensions

In a new report, a committee of UK MPs has recommended that ministers should provide some women with early access to their state pensions. This comes after thousands of women have argued that they have not had enough warning that their pension age was being increased by six years.

The new pension age in the UK will rise from 60 to 66 by 2020, affecting an estimated 500,000 women born between 1951 and 1960. A petition calling for “transitional arrangements” to support women affected by the changes was signed by over 130,000 people.

In order to ease the situation, a committee of MPs has proposed that some women should be given the option to retire slightly earlier with a slightly reduced pension. The committee’s chairman, Labour MP Frank Field, claimed that more work was needed before such a scheme could be implemented, but that this would “open up debate” among MPs.

The transitional plan would involve no extra cost to the public or the Treasury. Instead, the women involved would need to accept slightly lower weekly payments for the duration of their retirement.

In 2011 the government decided that the pension ages for both men and women would be equalised by 2020. This will be implemented under the 1995 Pensions Act.

In her article for IZA World of Labor, Laura Hospido demonstrated that couples are increasingly coordinating their retirement decisions, and that policymakers should consider this when thinking about pension reform. She shows that this can particularly impact the labour market when women exit early if their husbands have already retired as this "may increase inequality and reduce economic well-being among the elderly".

Marek Góra writes that pension styles have failed to adapt to population structures, and that they need to be redesigned to accommodate population changes and demographic changes. He makes the recommendation that governments "need to make pension systems more transparent and make adjustments to reduce the burden on workers, returning pension systems to a social role".

Related articles

Pension reform and couples’ joint retirement decisions, by Laura Hospido

Redesigning pension systems, by Marek Góra