DSD Response to Social Development Committee's letter on forthcoming Pensions Bill in NI

John Simmons
Committee Clerk
Committee for Social Development
Room 242
Your ref: CSD/017/2011/SK
Parliament Buildings
BELFAST
BT4 3XX

23 June 2011

Dear Sir

Briefing on the Westminster Pensions Bill – follow-up questions from the Committee

I refer to your letter of 13 June outlining the Committee’s request for further information about the impact resulting from the acceleration of the State Pension age to 65 for women.

The Committee has sought further information on:

• the time period that women will have to adjust to the proposed increase in their State Pension age; and
• the financial impact of the additional delay in reaching State Pension age.

The acceleration in the State Pension age for women to age 65 is a precursor to increasing the State Pension age to 66 by April 2020. It will affect women born between 6 April and 5 December 1953. From April 2016 the rate of increase will be three months in every four rather than the current rate of one month in every two. This will mean women’s State Pension age will be equalised with men’s by November 2018.

Under the current timetable legislated for in 1995 an estimated 7000 women born between these dates will have a State Pension age of between 63 and 63 and 7 months. The acceleration to age 65 will see these women experiencing a further delay of between 2 and 16 months depending on their date of birth. Approximately 5200 women will experience a delay of one year or under while around 1700 will experience a delay of over a year.

The length of time that women will have to adjust to the increase will largely depend on when a future Assembly Bill legislating for the change becomes law. However, women whose State Pension age is due to increase the most have a longer period of notice than those affected earlier, for whom the increase is smaller. If, for example, a future Pensions Bill is passed by the Assembly by 1 January 2012, those women least affected could still have over 4 years notice while those most affected could have nearly 7 years notice.

The Table at Appendix 1 details the delay that women affected by the change will experience and the typical period of notice they might expect. Officials are currently liaising with the Department for Work and Pensions to plan how and when the changes will be communicated.

The amount of basic State Pension income an individual might no longer have entitlement to as a result of the change in State Pension age will vary significantly, depending on the delay they face as a result of the new timetable, changes to the rate of State Pension as a result of uprating and their individual entitlement. The latter would, in turn, depend on the number of qualifying years of National Insurance contributions they had paid or been credited with during their working life. It is not therefore possible to predict accurately what the effect on an individual might be because of the number of variables to be considered.

It is, however, important to remember that the upper age limits for receipt of working age benefits will increase to ensure that they remain in payment up to the point a woman reaches her new State Pension age.

The Tables in Appendix 2 are therefore illustrative. Table 1 considers the situation of a single woman in receipt of main phase Employment and Support Allowance with a work related activity component prior to reaching State Pension age. At current rates she would be entitled to Employment and Support Allowance of £94.25 per week. When she reaches State Pension age, assuming she has 30 qualifying years, her basic State Pension would be £102.15 per week (current rates). Table 2 considers the situation of a single woman in receipt of Jobseeker’s Allowance at a rate of £67.50 per week. Table 3 considers the situation of a single woman who is not in receipt of any social security benefits.

I should be grateful if you would bring this to the attention of the Committee.

Yours faithfully

Anne McCleary
Director
Social Security Policy & Legislation Division

Appendix 1

Acceleration of women’s State Pension age to 66 – additional delay and period of notice.

Appendix 2

Table 1

Table 2

Table 3