Responding to the work and pensions committee’s call for views on allowing certain women to draw their state pension early, Royal London’s Steve Webb has warned this would be of little or no benefit to those most affected by increasing state pension ages.
Under the proposal, some women born during the 1950s who are facing sharply increased state pension ages would be allowed to draw a state pension earlier than planned, albeit at a reduced rate.
In its response, the provider pointed out such a scheme could not practically be implemented until April 2018 at the earliest, by which time the women who had least notice of changes to their state pension age would already have started to draw a pension.
For example, all of the women in the much-discussed group born between April 1951 and April 1953 would already be drawing a state pension and so the option of ‘early access’ would be of no value to them.
There is also a question as to whether early access for women only would be compatible with equalities legislation.
Mr Webb, director of policy at Royal London, said while the select committee is to be commended for looking at creative solutions to the problems faced by women who have seen large increases in their state pension age, unfortunately, early access is likely to be of very limited benefit to such women.
He said: “By the time the government had passed the necessary legislation, reprogrammed its computers and communicated the new option, most of the most affected women would already have begun drawing a pension or be close to pension age.”
Mr Webb instead suggested giving all workers greater flexibility on state pension ages might be an option for the longer term, particularly if there was “clear blue water” between the headline rate of the state pension and the poverty line.
He said: “Otherwise this would mainly be of interest to better off retirees, who could combine a state pension drawn at a reduced rate with other sources of income.
“For those with little other income, surviving for 20 to 30 years of retirement on a pension below the poverty line would probably not be a viable option.
“There would also be huge complexity, as the DWP had to invent rules to ensure people who received a reduced state pension by drawing it early did not simply claim back the shortfall through claiming higher means-tested benefits.”
Paul Lindfield, director at Manchester-based Sedulo Wealth Management, was in agreement stating by the time it could be implemented, it would no longer really be practical.
He said: “There is no cast iron guarantees with state pensions, it is something that in every government and change of parliament they fiddle with. I don’t believe the triple lock and new state pension has got any legs.”