Shrewd Hidden Loopholes in New Government Reforms Freezes the Pension of around 250,000 women

Today our investigation will unveil how around quarter of a million women will have their pensions frozen due to a gambit in the new Government rules. The women will lose out on hundreds of pounds of their saved retirement income over the next 2-years owing to a little known technicality in their final payable salary pension.

This means that their payouts stay at their present level, instead of growing with the rises in the cost of living. This would affect around 204,000 women, who have drawn their final salary pension already; however, they will not reach state pension age till 2016.

Many of these women have their retirement pensions already thrown into anarchy, as the age at which they can avail state pension has been moved back by 5 years.

“There is a category of older women, who have lost out because of this shrewd pension system so many times. Moreover, there has been high number of victims of discrimination. Often, policy-creators tend to forget this category has not had sufficient time to build adequate private and state pensions. Still these women find the goalposts keep being shifted and the pension funds are not coming through at the time they need or the amount they first thought. The changes made in the pension policy may appear trivial; however, in case, you put them together they will rapidly add up to a lot,” says Ros Altmann, a Pension Campaigner.

The state pension policies and the way we women take private pensions and company are presently being reformed. The state pension age has been changed from 60 for women.  By the year 2018, the women pension age will gradually increase to 65; presently it is 62.

As expected, the age for both men and women will increase to 66 in October 2020 and it would grow to 67 by 2028. So, women who are born in the year 1953 can expect to get her state pension in Nov 2018; 5-years later than she had been expecting her entire life.

Above all, from April 2016 the existing basic state pension of £113.10 a week will be changed by a higher single-tier pension of £155 a week.

Furthermore, the new loophole revealed by us falls under the changes made to the State pension. Actually, what is happening is due to increases in the retirement age, women are now being left with a wide gap between the years their employers guarantees them to pay the inflation hikes on part of their pension referred to as ‘guaranteed minimum pension’, and when the State Government begins paying them.

Their employer pension scheme contracts states that organizations will pay only till the time woman is 60, since this was the date they hit the pension age stipulated by the state, and the government would be liable. However, this age has not changes in spite the fact that pension age has increased.

Hence, if a woman claims the state pension at the age of 62 is left only with 2-years when nobody is accountable for covering the inflation rises. This affects only a person who is in the final-salary scheme and the ones “contracted out” (where workers choose to opt out of the paying National Insurance payments).

Employees stopped getting extra benefits like state second pension, which is presently worth up to an additional £164.30 a week along with the basic state payout. In exchange, employers were required to ensure that their employees got a GMP, which was at least equivalent to the state second pension. This, employees were mentioned, would increase with the cost of living.

These inflation rises add thousands of pounds to the worth of pension over the lifetime of worker. Employers normally pay all inflation-related rises up to GMP age. Also, they fund those accumulated since 1988.

The Government; however, pays the hikes for those above the pension age who built up their GMP between the years 1978 and 1988.

Inflation-related hikes in Guaranteed Minimum Pensions (GMPs) from the Government would be trashed under the new pension reforms. This will affect only the people claiming the new state pension; however, women not just get any increases from 60 to whatever their new stipulated state pension age is.

In the worst scenarios women will lose 3-years’ worth of hikes. A woman with Guaranteed Minimum Pension worth £4,500 a year might lose £1,396 in rises over 3-years, assuming total inflation growth of 5%. And now there is another technicality which is all set to hit them.

1 out of 10 of 7,000 private defined benefit pension policies make additional payments to employees who retire prior to their state pension age. These are called bridging pensions and are usually calculated as an amount equivalent to a portion of state pension, multiplied by the total time an employee has spent at a company. This accumulated payment falls away once the employee reaches state pension age. Again, these are related to inflation.

Several pension scheme contracts again mention a particular retirement age for women –leaving the ones that retire after 60 without any index-linked increases. The State Government claims that it never promised to pay hikes in inflation. However, many employees comprehended that they were guaranteed as a recompense for contracting out.

“This is seriously a double blow for women. Not just they have seen their pension age increase, but they are losing out again now. All women retiring in the next few years with final salary pensions must check the norms of their pension contracts. The Government has delegated the power to companies to modify the rules; however, some of them have decided not to do so, as the extra years of pension is too costly,” states Malcolm McLean, senior pensions consultant.

“The GMP age is a mandatory requirement; however, it is usually repeated in scheme rules, and all monetary benefits have accrued based on the factor of unequal ages; therefore, making any amendments to GMPs will entail Government intervention,” stated the spokesperson for the National Association of Pension Funds.

Additionally, the spokesperson for the Department of Work and Pension mentioned “Our reforms are making a fairer, simpler and an equal pension system; however, with such an intricate legacy going back numerous decades, this reformation cannot be achieved overnight. It must be understood that employees who have contracted out are among the most economically sound pensioners, as their state pension is augmented by a workplace scheme.”

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