Government backs down over pension age reform

Almost 250,000 women will no longer have to wait an extra two years before they qualify for the basic state pension under a £1bn U-turn announced by the Government yesterday.

In an attempt to head off a rebellion when the Pensions Bill is debated by MPs next week, ministers dropped plans to raise the state pension age to 66 for men and women in April 2020. This would have forced 245,000 women in their fifties to work another two years because the state pension age – 65 for men and 60 for women – is to be equalised at 65 from November 2018.

Women will still have to wait an extra 18 months before they receive the state pension, at present worth £102.15 a week for a single person and £163.65 for a couple. The qualifying age for both men and women will now be raised to 66 from October 2020. About 240,000 men will also benefit from the rethink.

Iain Duncan Smith, the Work and Pensions Secretary, admitted that the Government's original plan would have been "unfair". He said: "We have listened to the concerns of those women most affected by the proposed rise in state pension age so we will cap the increase to a maximum of 18 months. "

The £1.1bn cost of the change will be recouped from the £30bn eventual savings by raising the pension age to reflect longer life expectancy. When the age was set at 65 in 1926, there were nine people of working age for every pensioner. There are now three and the number is set to fall to nearer two by the end of this century.

To limit the burden on taxpayers, the qualifying age is to likely to be increased in stages to 67 and possibly as high as 70 in future, possibly in line with rising life expectancy.

Yesterday's announcement is the second U-turn in a week aimed at appealing to women voters amid concern in the Government that they are deserting the Coalition. Last week, ministers pledged an extra £300m to help with childcare costs when the universal credit starts in 2013.

Although the opinion polls give a mixed picture on whether there is a "gender gap", women are bearing the brunt of the jobs being lost in the public sector and mothers and carers are more likely to notice cuts in frontline services.

The rethink was welcomed by the Liberal Democrats, who had threatened to rebel on the issue. Jenny Willott, the party's spokeswoman on pensions, said: "The Government has listened to the concerns of thousands of women and capped the maximum increase that women will see."

But Labour said the extra wait should have been limited to 12 rather than 18 months. Liam Byrne, the shadow Work and Pensions Secretary, said: "This is a humiliating climbdown for David Cameron, who has ordered his ministers to rush out an 11th-hour change to his Pensions Bill which faced a storm in Parliament next week. It is just a sticking-plaster, and hundreds of thousands of women will still have to work longer and lose thousands without enough time to prepare."

Michelle Mitchell, charity director of Age UK, said: "It is a significant financial commitment from the Government at a difficult time. This will give a much needed six-month respite to all the women who would have had to work an extra two years. We would have liked the changes being made to have gone further.

"Having faced uncertainty twice already, these women must not be affected by any further changes to their state pension age again without sufficient notice."