Government ‘plays for time’ over £10 billion women’s state pension compensation question: update from AJ Bell’s Tom Selby

by | Mar 25, 2024

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Work and Pensions Secretary Mel Stride has made a statement to the House of Commons on the women’s state pension issue…but failed to commit to paying compensation. Instead, Stride said the government would ‘consider the findings’ of the Parliament and Health Ombudsman’s (PHSO) report – which concluded the DWP was guilty of maladministration in relation to increases in the state pension age for women

Tom Selby (pictured), director of public policy at AJ Bell, comments on the latest moves in this very topical issue saying:

“The government appears to be playing for time on paying compensation to women affected by hikes in the state pension age during the 2010s. Despite a weekend of furious negative publicity following the Ombudsman’s recommendation that compensation of up to £10.5 billion be paid to women impacted by the state pension age increases, the government has so far refused to commit to handing over any cash at all – and is under no obligation to do so.

“For its part, Labour is waiting for the government to show its hand before saying whether or not compensation should be paid. So, despite all the words to date, we are no closer to finding out if the so-called ‘WASPI’ women born in the 1950s will get any money, either from this administration or the next one.

 
 

“It’s important to note that the recommendation made by the Ombudsman relates to maladministration, rather than the fairness of the decision to equalise the state pension age for men and women. And even if the Ombudsman’s recommended compensation measures were implemented in full, this would fall well short of campaigners’ calls for £10,000 to be paid to all those affected – a figure which would add tens of billions of pounds to a bill that would ultimately be borne by taxpayers. It is hard to imagine any government going beyond the recommendation made by the Ombudsman, particularly given the difficult fiscal position the country finds itself in.

“It now seems increasingly likely if any compensation is to be paid, it will be under a new government after a general election. If polling is to be believed, that is likely to be Labour, meaning it could be shadow chancellor Rachel Reeves who is ultimately left with the headache of whether to implement the Ombudsman’s findings and, if she does, how to find the billions of pounds of cash needed to fund compensation payouts.”

Background

 
 

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 in 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 has been investigating 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, published last week, 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.

You can read the full Ombudsman report here: Women’s State Pension age: our findings on injustice and associated issues (ombudsman.org.uk). The key takeaway from the report is that the Ombudsman recommends compensation should be paid to the women affected at a level of £1,000 to £2,950 per person affected (so-called ‘Level 4’ compensation). This would cost the Treasury somewhere between £3.5 billion and £10.5 billion, the Ombudsman estimates.

While the Ombudsman’s findings may feel like vindication for the campaign, it has no power to compel the government to provide compensation or redress. It’s also worth noting that the Ombudsman’s findings focus 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 putting men’s and women’s state pension ages back to 60 could cost £215 billion. Given the findings of the Ombudsman, any government is unlikely to offer compensation above the level recommended – particularly when you consider the strained financial position the country finds itself in.

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