University of Exeter: Pension clawback adversely affected women and those with disabilities, analysis shows

Deductions from private pensions so workers could lower their contributions have led to them having to work more hours and longer than intended.

Researchers are calling for more people affected by pension clawback, or state deduction, to help with their study into the impact of the practice, where money is deducted from a private pension once the pensioner begins receiving the state pension.

As part of clawback in exchange for lower contributions during their working life, the worker’s pension from their employer is reduced once they hit state pension age. Employers such as Midland Bank used it to cut the costs of the pension scheme. Many schemes no longer use the system.

Dr David Barrett and Dr James Kolaczkowski, from the University of Exeter Law School, have interviewed 67 people who either are or will be subject to state deduction under the Midland Bank Section of the HSBC pension scheme about their awareness and understanding of state deduction and the impact it has or will or have on them.

The survey shows state deduction has a greater impact on women and individuals with disabilities because they were more likely to be paid less, work part-time, take career breaks and join from 1975. Their pensions are more likely to be smaller so a greater reduction has led to them having significantly reduced financial resources, and becoming more reliant on partners, reducing their financial independence.

Dr Barrett said: “Those affected have had less freedom around the timing of their retirement and have had to work for longer. Their independence has also been affected. It’s very important to discover more about the impact of clawback because thousands of individuals are subject to state deductions under the Midland Bank pension scheme and in pension schemes with other employers.

“We do encourage anyone who can help to complete our survey so we can collect more evidence.”

Many of those questioned said they tended to only be aware of state deduction when leaving HSBC for a new job, redundancy or retirement. Otherwise awareness came much later: in 2009 (when the scheme changed), 2018 (when a letter explaining state deduction was sent out) or through the efforts of the Midland Clawback Campaign. Part time staff said they faced a lack of information when they became eligible for a pension.

There was a general lack of understanding about what state deduction is with many participants believing it to be a form of tax. There was also a lack of clarity about how it is calculated and why it was being imposed. This lack of awareness and understanding meant that many participants had little time to make alternative arrangements (such as make additional contributions or increase savings). This was particularly acute for colleagues who joined earlier, women and individuals with disabilities.

One participant said: “I’ve gone back to work, so I can bridge that gap, because what might be a small amount each month to somebody else on a better pension than me it’s a big chunk”. Another said: “…the fact I was so near retirement myself thinking why didn’t I know about this before, why haven’t I had this information and also I’m not in a position really to do much to influence any decisions I might want to make…you know, for protecting my own income when I stop work”.