PENSIONSANDSAVINGS.COM

Here are some thoughts about urgent policy proposals to improve the fairness of the National Insurance system for women and for the aging population.

Top 5 policy recommendations:   

1. Extend triple lock to Pension Credit for oldest, poorest pensioners.
   
2. Allow early access to State Pension for ill-health, long service or carers.
   
3. Recognise WASPI concerns and address hardship caused by increased state pension age.
   
4. Remove National Insurance loopholes that cause women to lose State Pension credits.
   
5. Offer free personal social care funded by National Insurance plus incentives for private care saving – modelled on State Pension concepts.
   

We will soon see all the Election Manifestos. Of course the issue of Brexit will be important in many people’s voting decision, but there are so many other issues. Here are my top five suggestions to improve the State Pension system, especially for women and the poorest or most vulnerable older people. Plus urgent changes to ensure social provision of old-age care. These reforms would make the system more socially equitable.

1. State Pension uprating (triple lock or double lock) must apply to Pension Credit for poorest, oldest pensioners: Currently, the triple lock does not protect the poorest pensioners. Social justice would suggest the oldest and poorest pensioners need the best protection, yet this is not happening. Just the old Basic State Pension (£129-20 a week) has the triple lock while the full new State Pension (£168-60 a week) which is only available to the youngest pensioners also has the triple lock minimum 2.5% annual increase or the higher or earnings or CPI inflation. However, Pension Credit (£167-25 a week), the old Graduated State Pension, State Earnings Related Pension (SERPS), and Second State Pension (S2P) are only protected by cpi price inflation. To look after the most vulnerable pensioners, (the majority of whom are women) requires a Manifesto commitment to ensuring Pension Credit is increased by at least the same as the new State Pension. If the triple lock stays, then it should apply to Pension Credit. If moving to a double lock (best of price or earnings rises) then Pension Credit should benefit the same way.

2. Allow for differences in life expectancy and health in the State Pension – early access to State Pension to reflect poor health or caring or long contribution record: The State Pension age has risen sharply, causing significant problems for many older citizens, especially women who had not anticipated the changes, or are caring for others. Until a couple of years ago, those who couldn’t work, were seriously ill, or caring for loved ones could claim means-tested Pension Credit from age 60. This helped both men and women. However, Pension Credit starting age is now approaching 66. Regardless of health, other income, work capability, caring duties or number of years of NI contributions, older people are left on ‘in-work’ benefits. In addition, just one member of a couple over state pension age would allow Pension Credit application, but now eligibility depends on the age of the youngest partner in a household. Suddenly, many of the poorest over-60s are left to rely on employment benefits, even if it is not realistic for them to keep working. The current system makes no allowances for the vast differences in life expectancy among different regional, social or employment groups. Healthy life expectancy varies by around 19 years across the country, yet the State Pension system will continue to increase the starting age. Unlike in a private pension, you cannot receive a penny early.  Although only 35 years of NI are required for a full pension, but even with a 45 or 50 year record, people must still wait till after the starting age. It would perhaps be fairer to allow early access to State Pension after, say, 45 years of contributions, or to recognise ill-health or caring duties. This would improve the role of State Pensions as part of our welfare system.

3. WASPI – Recognise hardship for older women caused by failure to adequately inform about State Pension Age changes: The long-running WASPI and Backto60 campaigns about state pensions from the 1950s women needs to be addressed. The anger felt by many of these women, now in their 60s, is understandable. I have campaigned for many years for recognition of the hardship caused by failure to properly inform those affected and also failure to recognise that women have been serially disadvantaged in pensions for decades. I am in favour of equalizing pension ages, but this still leaves women unequal in pensions. I cannot support paying all these women the equivalent of a state pension back to age 60. But I do believe there are many who should be allowed to claim help from the National Insurance system to recognise the hardship they are facing, despite a long NI record, poor health, inability to work or caring responsibilities. Past Governments did not adequately inform the women affected and I hope the parties will consider early payments or Pension Credit for those affected by increased pension ages, to offset some of the hardship caused.

4. Remove the National Insurance loopholes which reduce many women’s state pension – Child Benefit, low earners, partial year accruals: Many people, mostly women, are losing credits for their State Pension because of wrinkles in the state pension system. In the 21st century, rules should be more flexible to prevent people inadvertently missing out. Women who do not claim Child Benefit when they know they are not entitled to it should not be deprived of their state pension accrual. Similarly, those earning less than the NI lower earnings threshold should still be credited for state pensions. And partial years of contributions should be accrued, rather than so many women losing out on a whole year if only some months of NI were paid. These changes would improve the way National Insurance pensions work for women in particular.

5. Provide free personal social care funded via the NI system and introduce incentives for additional saving for care: The biggest failure of social policy is the lack of decent provision for elderly care. If Beveridge were designing our National Insurance system today, old-age social care insurance would clearly be included. The state should provide a basic level of care for older citizens who cannot live independently. In our aging population, around 1 in 4 older people will need some care, but it is not possible to predict in advance who these people will be. Therefore, everyone should pay contributions through their life, in exchange for basic care provided should they need it.  In addition, people should all be encouraged to make individual provision to top up state care, in case they want some money sooner, or to have more control over the place and type of care they prefer. Providing feee personal care for those with assessed needs and also incentivising people to save for more than this if they can is based on similar principles to state and private pensions. Indeed, private pensions could be encouraged to include cover for care needs in later life, as well as Care ISAs.

These proposals could form part of a progressive reform agenda to help the National Insurance system provide better quality of life for older citizens in our aging population.