In our weekly series, readers can email in with any question about retirement and pension saving, to be answered by our expert, Tom Selby, director of public policy at investment platform AJ Bell. There is nothing he doesn’t know about pensions. If you have a question for him, email us at money@inews.co.uk.
Question: How can it possibly be fair that, having apologised for communication failings, the Government has refused to pay compensation to women affected by state pension age increases? What on Earth is the point of having an Ombudsman if politicians can simply ignore its recommendations?
Answer: There’s more than a little history here, so it’s probably worth unpacking how we’ve got to where we are today before answering your question. It’s all to do with relatively recent increases in the UK state pension age.
Today, men and women in the UK have the same state pension age of 66. This has not always been the case, however. Prior to 2010, women received their state pension from age 60, while men had to wait until age 65.
The 1995 Pensions Act first put forward proposals to increase the women’s state pension age to 65 – bringing it into line with men – between 2010 and 2020.
The 2011 Pensions Act accelerated this timetable, meaning the state pension ages of men and women were equalised at age 65 in 2018 before increasing to age 66 by 2020. From here, plans are in place to increase the state pension age to 67 by 2028 and 68 by 2046.
Campaigners have long argued the changes introduced under the 1995 and 2011 Pensions Acts were unfair to women born in the 1950s, with some forced to wait six years longer than they previously expected to receive their state pension. One of the central charges was that the Department for Work and Pensions (DWP) failed to adequately notify affected women so they could adjust their retirement plans.
This case was considered by the Parliamentary and Health Service Ombudsman (PHSO) over a number of years. The Ombudsman investigated complaints that since 1995 the DWP had failed to provide ‘accurate, adequate and timely information about changes to the state pension age for women’.
In the first stage of its investigation, published in 2021, the Ombudsman concluded that the DWP did not adequately respond to research in 2004 which recommended information should be “appropriately targeted” at those affected by the reforms. As a result, it found maladministration had occurred.
The second and third stage of the Ombudsman’s investigation considered a number of additional issues including:
- The DWP’s communication about the number of national insurance qualifying years needed for a full state pension;
- The DWP’s complaint handling;
- The Independent Case Examiner’s (ICE) handling of complaints about DWP’s communication of changes to state pension age;
- Whether maladministration led to injustice;
- A proposed remedy.
The key takeaway from that report was the Ombudsman’s recommendation compensation should be paid to the women affected at a level of £1,000 to £2,950 per person affected (“Level 4” compensation). This would cost the Treasury somewhere between £3.5bn and £10.5bn, the Ombudsman estimated.
For the Women Against State Pension Increases, or Waspi, campaign, the ruling raised hopes their long-running battle could result in a payout for millions of affected women.
There was always a risk of a sting in the tail, however, because while the Ombudsman’s findings may have felt like vindication for the campaign, it had no power to compel the government to provide compensation or redress.
Last week, Work and Pensions Secretary Liz Kendall apologised to the women affected by maladministration – but said the Government would not be paying any money to them.
In its response, the Government claimed that 73 per cent of 1950s-born women knew the state pension age was changing in 2004, rising to 90 per cent by 2006. It added that any potential redress scheme would be “neither fair nor feasible” to the taxpayer.
The Government has already faced huge criticism for this decision, particularly as many current ministers have previously suggested the women faced an “injustice”. Some have also argued that ignoring the recommendation of the Ombudsman sets a potentially damaging precedent.
Campaigners and MPs are likely to place more pressure on ministers, but it is under no legal obligation to pay financial compensation.
It’s worth noting that the Ombudsman’s findings focused on maladministration, rather than the perceived “fairness” of increasing the state pension age of women. In 2019, the High Court heard arguments that the state pension age increase discriminated on the ground of age and/or sex and sought a judicial review of the Government’s “alleged failure to inform them of the changes”.
The Court dismissed the claim on all three counts, and an appeal to the Court of Appeal in 2020 was also thrown out. The government has previously said that putting men’s and women’s state pension ages back to 60 could cost £215bn.
