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David Hencke digs into new research published by the Department for Work and Pensions on the cost of compensating millions of women who lost out on pensions when the state pension age was raised from 60 to 66.
The Department for Work and Pensions has produced statistics to frighten the public into believing that compensating 3.8 million women born in the 1950s for lost pensions will cost more than double the real price, Byline Times can reveal.
A research report by the DWP, published a day after the ‘Back to 60’ judicial review hearings earlier this month – and given widespread coverage in mainstream media – put the cost between an eye-watering £188 billion and £212 billion, instead of its previous figure of £77.2 billion.
The directly comparable figure hidden in a footnote is £91.1 billion at today’s prices.
The figures were released as the two judges, Lord Justice Irwin and Dame Philippa Whipple, start working on their judgement as to whether the Government should have to compensate the women.
By not comparing like with like, the ministry added nearly £100 billion to the figures and, by adding men into the equation, it has added another £17 billion.
The research was part of the evidence given by Duncan Gilchrist, deputy director for fuller working lives and state pensions policy at the DWP, to the judicial review, which has then been transformed into a DWP research paper.
However, the figures he used in his written evidence were irrelevant to the specific case the judges were hearing. The judicial review related solely to whether 3.8 million women born between April 1950 and April 1960 are entitled to their money back. The DWP produced figures showing how much it would cost to return the pension age back to 60 for women and 65 for men between 2010 and 2025/6 – which is outside the scope of the judicial review.
By not comparing like with like, the ministry added nearly £100 billion to the figures and, by adding men into the equation, it has added another £17 billion.
Not So Well Off – DWP Discredited by its own Figures
The department also released figures on the private pension wealth of the 1950s women, which go against its argument.
They show that the 1950s women were, by and large, not well off. Indeed, those born in the late 1950s were a bit worse off than those born earlier.
They figures reveal that 51% of women born between 1951 and 1961 had a private pension pot worth less than £50,000 which would provide a pittance if converted to an annuity. It would not qualify for those who wanted a SIPP (Self Invested Private Pension).
Only 10% of ‘Back to 60’ women have a pension pot of £500,000 or more… This figure compares to 23% of men.
Only 10% of the ‘Back to 60’ women have a pension pot of £500,000 or more – which in a well-invested SIPP could produce an income of around £38,000 a year and much less with an annuity. This figure compares to 23% of men.
In written evidence to the judges, Mr Gilchrist glossed over this poverty by using figures from the Resolution Foundation stating that the real wealth, including property, of the 1950s women had increased from £100,000 to £300,000. This ignored whether the same women (and many have contacted me about this) have now been forced to sell their homes or get equity release – which drastically reduces their assets.
International Competitiveness
In other evidence given by the DWP, the ministry claimed that the UK’s international competitiveness would be damaged if the women received the money because other countries are raising the pension age.
It cited a selective list of countries to illustrate rises in the pension age. Examples included Denmark which would raise it to 74 – although the small print revealed that this would not be until 2070. It also revealed that Canada had backtracked on raising the pension age to 67 and that Japan was sticking with 65. The list excluded Poland, where it has fallen, and was not up-to-date with the latest proposals in Italy.
It is the view of the DWP, and of central government more generally, that reversing the legislative decisions…. would be both highly detrimental to good administration and hugely expensive to the public purse.
David Gilchrist, Department for Work and Pensions
His evidence also stated that if ‘Back to 60’ – the campaigning group which brought the judicial review – won the case it would be very complicated to implement the compensation and would cost the ministry £300 million in administration.
Gilchrist wrote: “It is the view of the DWP, and of central government more generally, that reversing the legislative decisions which have taken place with regard to SPA [state pension age] would be both highly detrimental to good administration and hugely expensive to the public purse.”
He also claimed that “with the existing workforce, who currently have the appropriate skills, such a correction exercise for this customer cohort (if undertaken by clerical calculations) is likely to take in excess of 20 years.”
But, this presumes that the ‘Back to 60’ case is based on a reversal of the state pension age. It is not. It is about redressing an injustice for – as Michael Mansfield QC, representing ‘Back to 60’ called – “a sub-class” of 1950s women, not an overhaul of the state pension system.
A DWP spokesman said it could not comment on the case because it is the subject of litigation.
Privately, the ministry admits that the new figures published do not reflect the costs of compensating the 1950s women. Instead, it says the Government decided separately to issue the new figures the day after the judicial review. However, that does not explain why the figures were used in the case by a top DWP civil servant.
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This article was corrected on 22 June 2019 to clarify the DWP costs including putting the pension age back to 65 for men as well as 60 for women.