Evidence suggests they have been cheated by successive governments’ mishandling of the NI Fund
Have women born in the 1950s been short-changed? Of course they have. Their state pension age has been pushed up from 60, the age they expected to retire for much of their working lives, first to 65 and then, for most of that cohort, to 66. That has left a massive hole in their financial planning as they struggle to find or keep work at a time of life when doing so can be very difficult.
They face individual losses of tens of thousands of pounds from what they expected to get and which they believe they have paid for over 40 years of working and paying taxes.
They also object very strongly to losing the benefits associated with being of state pension age, such as free bus travel.
Nor can they claim pension credit, which can boost the income of a single person to £163 a week. The alternative is jobseeker’s allowance of £73 a week, which requires genuine job-seeking.
Now campaigning journalist David Hencke says they have been cheated in another way. In a discovery worthy of Indiana Jones, he has unearthed an ancient manuscript on a dusty website that has not been updated or looked at since it was put there 12 years ago. It was written by policy guru Tony Lynes, who sadly died in a road accident four years ago at the age of 85.
From the grave, he has given new energy to the BackTo60 campaign. This is the new group of 1950s-born women who want the entire pension age rise reversed – as has happened in Poland.
Lynes’s paper, The Rape of the National Insurance Fund, shows that potentially hundreds of billions of pounds have been taken from the fund by successive governments.
Having done that, they claimed there were insufficient resources in it to pay for an increase in the basic state pension.
Lynes wrote the paper for Southwark Pensioners Action Group, part of the radical National Pensioners Convention, which was calling for such a rise.
The Government Actuary’s latest report says the income of the fund will be around £106bn in 2018/19. That comes from the National Insurance Contributions people in work and their employers pay. Out of that, the state pension will take the lion’s share of £96bn. The rest goes on contributory benefits for people who are sick, bereaved, new mothers or newly unemployed and those made redundant. Almost £1bn goes on administration and “miscellaneous”. This year, the fund will take in around £2bn more than it pays out.
Lynes says – and it is borne out by other documents I have found – that when the fund was set up in 1948 its income from contributions was boosted each year by a Treasury supplement. In 1973, that was fixed at 18 per cent of its contribution income. So NICs only paid for part of the benefits the fund provided and did not pay anything for administration.
Lynes reveals that, in the 1980s, that Treasury supplement was cut from 18 per cent to 5 per cent and was finally abolished in 1989.
That was affordable because, from 1978, NICs changed from flat-rate to earnings-related. As they rose with earnings, the benefits paid out increased only with prices, so the fund could pay its own way.
In years it did not, there was provision for an ad hoc Treasury grant. That has been paid occasionally but the Government Actuary has no expectation of a further one until 2023 at the earliest.
Lynes also explains that, between 1996 and 2002, three green taxes were imposed on businesses.
In return, employers’ NICs were cut. So the fund in effect paid for these green taxes, which Lynes reckoned cost it £2bn a year. Then, in 2002, the government added 1 per cent to all NICs to boost the money paid to the NHS. But in an arithmetic sleight of hand, the NHS got around £1bn a year more than the extra contributions that were paid.
Hencke estimates the lack of Treasury supplement has cost the fund £271bn. However, the actual figures in the fund’s accounts show replacing the Treasury supplement with ad hoc grants has denied it a net total of £310bn since 1981 when the supplement was first reduced.
A slightly less firm estimate of the total cost to date of the green taxes diddle and the NHS fiddle adds perhaps another £70bn. With the interest these surpluses would have earned, the fund is probably around £400bn lower now than if all those things had never happened.
That is a staggering sum for a fund which the Government Actuary predicts will have a balance of just £26bn at the end of this year.
Hencke says it calls into question the need for the rise in women’s state pension age at all. The cost of compensating all 1950s-born women has been put by pensions minister Guy Opperman at £70bn. Hence the new energy in BackTo60, which it badly needs.
The first group campaigning for the 1950s-born women – the Women Against State Pension Inequality – has been riven by more schisms than the early Christian church, achieving no change in the pension age rises nor compensation for those affected. Now women are rallying around the proof as they see it that the change was not even necessary. It merely filled the gap left by successive governments through their – to use Lynes’s word – “rape” of the National Insurance Fund.