This is the first in a series of blogs looking at the changing face of benefits for those who have come of pension age, when exactly is it and changes for current and aspiring pensioners. We review the still important for all “old style State Retirement Pension and look at the new style “single tier pension scheme for those reaching pension age after April 2016 .
Much of my recent blogging has been focussed on keeping up to date with the whirlwind of welfare reform changes for readers of “working age” . But on the whole cancer tends to be more common as we age; all part of the cell replication and replacement that keeps us going but which over time is more and more likely to get out of kilter.
And surprising as it may be to cool and trendy young things, there was no difference in the age profile of visitors to the Online Centre - and very likely to the new Maggie’s Online - as to Maggie’s Centres around the country. So my apologies, if I have been neglecting you, O my best beloved silver surfers. I plan to rectify that with a mini series about changes for benefits in pension age, sparked particularly by queries about the new State Retirement Pension that kicked off this April.
But before I get into that I will start by looking at why welfare reform seems very different before and after that “pension age” line. And when exactly is that line anyway? And what are the key benefits that might be affected if you have either been given a cancer diagnosis or have become a carer for someone who has, when you are over “pension age” ?
Next time, I will look in detail at the pre- April 2016 Retirement Pension that almost everyone over pension age will currently be receiving and will carry on getting It’s the biggest single benefit of them all, but generates few queries in its own right and almost everyone entitled claims it. One question I do get is a mild bemused “How is my pension worked out” ?
And after that I will look at the new “simpler” Retirement Pension that will affect anyone retiring after April 2016. Except the Pensions Service will also be looked at your entitlements under the old scheme for contributions made before April 2016 , so I will look at how that comparison works when they work out your pension if you retire after April 2016.
1. Of coming of pension age:
But when exactly do you stop being of “working age” these days?
Once upon a time it was: 60 for women and 65 for men, but that 60 for women is creeping upwards for new pensioners. As women live longer, it may seem odd that their pension age was lower rather than higher, but there was a logic when this difference was introduced back in 1940.
Back in the day, the traditional family model allocated men the role of main breadwinner and women that of homemakers, operating as a unit. Pensions tended to be based mainly on the man’s lifetime contributions while earning. And to this day, men were traditionally the older partner in a heterosexual couple - by an average of two and a half years. So come 65, a couple might be struggling for a while on a single pension, if they had to wait until the women’s 65th birthday cards arrived for her to pick up any pension to which she was entitled.
Times have changed, with a wider pattern of couple and family relationships, more women earning and homemakers now receiving their own National Insurance credits during years looking after children or being carers. Indeed, the new pension - which I will look at later in this series - no longer maintains any connection between a couple’s pension entitlements.
So there was method in the previous arrangement . However the long term plan for pension age is :
- first to phase in an equal pension age” - sadly thats 65 not 60 by November 2018 .
- and then as both men and women are on average living longer and drawing their pension for many more years, that new equal pension age is set to be increased from 65 to 66 by 2020 with future phasing in to 67 then 68… and beyond…
We are now nearing the end of that first phasing in of the "equal pension age" at 65. Little by little, the age at which women can start their claim for State Retirement Pension (SRP) is gradually creeping up. Remember those days when it felt really, really important to sign your latest masterpiece “Sue, aged 7 and 3/4”, before handing it to overjoyed parents to stick it up on the fridge?
Well those quarters have been back as the pension age has been rising bit by bit . The crucial age at the time of writing this blog for people retiring between May and July 2016 was 63 and 1/4 And at the time of revising in July 2018 it is just about to reach 64 and 2/3
However, It is not just women who are affected by this phased increase, as this is also the common age for both men and women to claim Pension Credit. So at the moment, a man aged 64 - depending on his fraction - is at an awkward age
He is still of “working age” for most benefits, but when it comes to “means tested” benefits, he can claim Pension Credit, without all the hassle attached to its “working age”equivalents. But Pension Credit is a very interesting tangent for another blog or two :-)
So where is this rising pension age taking us:
- by November 2018 there will be an equal pension age of 65 for men and women for both Retirement Pension and Pension Credit
- then between December 2018 and October 2020, a second phasing in process starts to bring this new equal pension age up to 66
- the next step which was scheduled to take place between 2034 and 2036 has been brought forward eight years to between 2026 and 2028 and will bring the pension age to 67. And your blogger hopes to feel the effect of that.
- The next increase - to 68 was scheduled to take place between 2044 and 2046 - to bring the age up to 68- but this is now being brought forward 7 years to 2039-41.
That last recommendation and on further increases in pension age will be reviewed by a panel of experts every 5 years or so, based on longevity statistics and trends. The benchmark is to keep the average time in retirement at 32% of adult life. The first report was produced in July 2017 - see in links below.
The pensions industry are anticipating an increase of 1 year every 9 years or so, which would lead to a pension age of 73 by 2060
You can see the full timetable of the changes to pension age in the links Or you can just type in your your birthday and check your pension age individually. I couldnt resist and am told that I will qualify for pension at 67 and a free bus pass at 60 as we still get them younger in Wales, though we can't make quite so long journeys.
2. Of pensions, other benefits and cancer
2.1 What are the main benefits in pension age?
If you stared at a list of the 40 or so benefits, you might feel it was a bit of a maze. It does get easier in “pension age” as a lot of the benefits seem by their very names names to apply to those of “working age” and the different reasons for not earning. When you are past pension age, you are paid simply because of your wisdom and sagacity, regardless of what’s happening in your life.
But whether the maze is simpler or many forked, it can still be helpful to think of your possible benefits in three steps. And if you are in the mood for light exercise to think of the “Do-re-mi” from the Sound of Music, as you lightly walk or jump up and down some steps.
- Step 1 is comprises the basic earnings replacement benefit to make up for not having an income from work, These go back to the main Beveridge idea - implemented in 1948 - of an insurance based system for all, covering against illness, unemployment and old age. Everyone has to pay their National Insurance premium and as a result is then entitled - just as with any house fire or bump in the car - to claim on that policy if needed. The idea was to do away with the muddled, partial insurance of the past and the indignity and discretion of the Poor Law, in favour of universal insurance to prevent poverty and encourage your own additional provision , rather than catch you in a safety net after you have fallen. And it’s here on Step 1 that the State Retirement Pension fits in
- Step 2 - covers the “Income-related" or means tested benefits - The door was left ajar for these to creep back in, to offer a safety net provision for those who didn’t have enough contributions for say a full State Retirement Pension or who were left on a very low income even after claiming one. These either top up your income e.g. Pension Credit or they help with specific bills e.g Council Tax Support and Housing Benefit
- Step 3 includes extra non-measns tested benefits to help with additional costs. These might include those welcome extras for all such as Winter Fuel Payments and TV licenses, But more specifically where ill health leads to additional costs there is a very useful- if not well named Attendance Allowance.
2.2 How might these Steps be affected by a cancer diagnosis?
In many ways, your income in retirement is already fixed, perhaps long before a cancer diagnosis comes crashing into your life. You are already not working, so the big shock of having to cut down or stop work - while undergoing treatment or taking time out to be a carer - is avoided. But while a cancer diagnosis in retirement may not threaten a loss of income, it certainly does bring with it some extra costs. So is there any extra help available ? The short answer is often almost invariably yes :-)
Well, taking one step at a time:
- Step 1 - your State Retirement Pension is paid simply because of your age, in sickness or in health so doesn’t change directly. However if you carried on working past pension age you are still entitled to Statutory Sick Pay as a minimum sick pay from work, although you wouldn’t be able to claim the equivalent Contributory ESA from the DWP. A carer - of any age - may benefit indirectly from a new claim for Carers Allowance. If you are approaching pension age when you become unwell this may well have a bearing on private or occupational choices and if you still have funds in your pension pot, then these too must go.
- Step 2. The main focus here is about how your overall income compares with the relevant amount on a scale, based on your circumstances. If you are not still in paid work, then your income is unlikely to change . However, your “appropriate amount” in the sums - the level to which you may be topped up or at which you might receive full help with rent or council tax - can increase dramatically as a result of additions for disability and/or being a carer. As a result you might get an increase in Pension Credit (PC) already claimed , or you may now become entitled to claim for the very first time, when you might not have been before
- Step 3 is where there is the main trigger for those changes back in Step 2. You may have been enjoying a healthy retirement until now. The extra difficulties caused by living with cancer - and its treatments - may mean that you can now claim Attendance Allowance. And if you do get an award of AA, then it’s back to Step 2 to explore the positive effects that award can have on your entitlement to means tested benefits such as Pension Credit, and for a carer to claim Carers Allowance under Step 1.
2.3 Lets take some examples:
- Mr Modest is getting by frugally on a full retirement pension, some small works pensions and is among the 30% of people entitled to Pension Credit who don’t claim. His Maggie’s Advisor helps him claim Pension Credit straight away while awaiting the outcome of a claim for Attendance Allowance, which may also lead to an increase that Pension Credit.
- Mr and Mrs Middling-Sorte - have full pensions and some larger pensions. Mr Middling already receives Attendance Allowance because of age related arthritis and sight problems. Ms Sorte gets a cancer diagnosis. Her Advisor helps her claim Attendance Allowance, and checks their potential entitlements under Step 2. Nothing at the moment, but once the Attendance Allowance comes through, the sums start to look very different
- Ms Welltodo - has a full Retirement Pension, a very good works pensions and substantial savings. There is no potential for her under Step 2, but she can still claim Attendance Allowance, as a contribution to the extra costs of living with cancer, regardless of her income and savings.
3. Of whirlwinds and gentler breezes : Welfare reform in pension age
Past blogs have focused on the whirlwind of changes for “working age” claimants with real cuts and benefits freezes for existing claimants as well future cuts for new claimants all within a shrinking budget The emphasis is on stricter conditionality, increased means testing, a growing discretionary element, and a much more judgmental narrative.
In “pension age” talk of change is much more respectful. The State Retirement Pension has a “triple lock” guarantee securing real annual increases and reforms such as the new State Pension are based partly on the aim of strengthening the pension as a non-means tested platform to encourage people to make their own provision for retirement non-means tested bases aiming to reduce the need for Pension Credit. Important universal and non-means tested benefits such as bus passes, tv licenses and winter fuel payments remain. Real spending is increasing
There is a long term problem with pensions in an ageing population, as that lies behind these long term reforms such as raising the pension age and the new state pension:
- back in 1948, the life expectancy at birth was 65.3 for men and 70.1 for women. In 2013 this was 78.7 for men and 82,6 for women. More of us can hope to claim retirement pension and do so for longer than once was the case. Back then it was 23% of adult life, but this has extended to 32%
- that fact together with recent generations tending to have less children than we used to, means that the overall population is growing older which means there are fewer “working age” people for every pensioner. And a changing proportion is a problem for a system based on numbers staying roughly constant, so that current contributors to the National Insurance fund pay for the pensions of the currently retired, just as the future contributions of their children will pay theirs.
- the triple lock guarantee for annual pension increases has meant welcome real increases for current pensioners but adds to the long term pressures on the funds - more next time.
- An increasing number of people having been retiring with a significant part of their working lives covered by a an additional state pension. By 2025, people could have been retiring with their entire lives covered by additional state pensions such as SERPS and Second State Pension
There is a range of options potential options to deal with these challenges. But the chosen approaches so far have been: - the raising of the pension age - the new State Retirement Pension closing down the additional state pension schemes - changes to Pension Credit
Other aspects of pensions policy have all sorts of arguments in their favour and may be very welcome to today’s pensioners, but probably have an opposite effect when it comes to “affordability of the system” long term. These include the “triple lock” guarantee on annual increase, and universal non-means tested Winter Fuel Payments, bus passes and free TV licenses for the over 75s.
4. Future blogs
Next time, I will run through the pre-April 2016 State Retirement Pension scheme in more detail which is the one most relevant to current pensioners and will still be relevant to new pensioners for some time to come.
I will then go on to look at the new post-April scheme and how your pension entitlement under under the new scheme is compared with entitlements built up under the old scheme.
And once we have looked at the big change in the biggest benefit of them all, I will in future blogs take a look at Pension Credit and Attendance Allowance, and how they can interact in a good way :-)
Please post your general queries questions and experiences in the Forum and call in for individual face to face advice at our Maggie’s Centres which you will find here.
Best wishes
Tom
Maggie’s Online Benefits Advisor
(originally posted in May 2016, revised and updated July 2018)
Useful links and further reading:
Finding individual help from an advisor:
- Visit your local Maggie's Centre and talk with one of our benefits advisors. Find your nearest centre here
- See if there is a Macmillan advice service near you here
- Find your local Citizens Advice office: in England & Wales - here. In Scotland - here
Other blogs in this series
- Part 2: State retirement Pension - the pre-april 2016 sytem - history and what makes up your entitlement - available here
- Part 3: State retirement Pension: the new post April 2016 scheme and how your entitlement is still largely governed by the old rules - available here
- Part 4 . Extra help after a cancer diagnosis: Disability benefits and Pension Credit - available here
- Part 5 : Pension Credit sums made easy - available here
Some external links