27.03.17

Will State Pension Age Keep On Rising?

The UK state pension age (SPA) could increase to 70 by as early as 2057 if the government follows the recommendations set out in John Cridland’s review published on Thursday 23rd March.

Cridland, a former Director General of the CBI, was asked a year ago to look into the need for changes on top of the Government’s existing commitment to raise state pension ages to 68 by 2046.

(Women, it will be recalled, are in any case on a fast track to state pension ages linked to the current male SPA of 65, by November 2018.)

So after years when nothing changed much and state pension ages were set in stone, we now seem to be on a moving escalator. Wherever will we end up?

The longer term scenario is that for each periodic increase in average life expectancy, state pension age will nudge up a bit more to compensate, thus retaining an even balance between the proportion of our lives in work and retirement.

The argument for change was delivered with a double barrelled blast as a second report from the National Audit Office was published on the same day as Cridland’s. This has modelled the effect of anticipated increases in life expectancy on alternative assumptions.

The first of these is that we would spend a third of our adult lives, from 20 onwards, in receipt of a pension. If this happens, says the NAO, state pension age will need to reach 69 by 2056.

The second scenario is that we will spend slightly less than a third, 32 per cent in fact, of our adult lives in retirement. Modelling this option the NAO says that state pension age would reach 70 by 2056.

This is the number that has been grabbing the headlines in the UK media.

Imagine, say an eighteen year old, starting work today. In 2056, 39 years’ time, he or she would be 57 and have a further 13 years to work before being able to draw their state pension.

Advertisement

- ADVERTISEMENT -

For some people in some jobs this will be possible, but there will be others for whom it is a terrifying prospect.

Already, fewer than half of people are in work by the time they hit state pension age. Raising SPA to 68 or 70 could inflate this number considerably.

Both Cridland’s and the NAO reports were commissioned on the basis that we have a seemingly inexorably ageing society.

This may turn out to be an exaggeration. One of the biggest issues to bear in mind, if the SPA really does creep up in the way suggested, is the inequity of its impact.

Average life expectancy is a statistic that conceals enormous inequalities, connected to location in the UK, health, life-style, working and living environments and more. A big hike in the SPA will affect poorer and less able bodied people disproportionately.

On the other hand a flexible retirement age that takes into account the arduousness of work and the length of time one has been working would be a progressive move, if only it could be achieved.

It could be difficult to manage but if our society needs people to do hard, dirty and wearing jobs that contribute to reduced life expectancy, it should be considered. How can we expect people like this to subsidise the better off?

Many of them are healthier individuals who will live longer and take more than their fair share out of the global state pension pot.

Unfortunately Cridland refuses to touch the idea of adjusting the state pension age for the individual on account of the nature of their work.

Yet there is a strong case to take into account the undoubted health effects of arduous work on those who do such grinding, wearing jobs and from which the rest of us benefit.

We take for granted, for example, the fact that some people spend their lives working nights, so that the rest of us can enjoy the security and services they provide. Yet there is strong evidence that night shift working and rotating shift patterns make us more vulnerable to a range of illnesses and wear people out more quickly.

Rejecting proposals to allow early state pensions in such cases was a poor choice.

Cridland’s excuse is that a single state pension age is, “simple and clear and provides a trigger for pension planning”.

Simple, maybe, but “the state pension age” is not, and probably never will be, the same as “the retirement age”. People will retire because their health forces them to do so, but they will have to wait longer to get a pension.

Basing national pensions and retirement policies on assumptions that are increasingly distant from reality, is hardly a recipe for clarity in planning.

Pushing up state pension ages using the standard broad brush approach, is always going to leave some people behind.

Such people will be left scraping around with difficulty and hoping for a state benefit, or maybe, forced to find post retirement jobs.

Hence, flexible working in little jobs in later life will become more common. This may not help everyone and could lead to more exploitation of older people on zero hours contracts and the like.

On a more positive note, Cridland does put forward a number of suggestions that could be helpful, though whether they will adequately mitigate the increasing inequalities flowing from differences in work-life experience is another matter.

He supports a “mid-life MOT” to help people plan their later lives, “addressing their lifestyle, their skills, paid and unpaid work, and their retirement income”.

There is mounting support, from divers quarters, for this notion, long supported by TAEN. However, so far little or no public money has been made available to take it forward.

 

If a time comes when the average person works to 70 before getting their state pension, we will need a range of supporting policies. It will be no use to think about these when the time comes - we need action sooner rather than later.

At the very least we would need extensive support for mid and later life career changes, personal development throughout working life and effective partnerships that encourage individuals to maintain their working capacity and career prospects over the long haul.

Whatever happens, the questioning should start now in earnest.