Week Starting : 28th November

Turner Lays Out Framework For Future Pensions Settlement

Three years in the making, the Pension Commission’s report was finally published this week. And following the ‘well informed’ leaks to the Financial Times ahead of its publication, it contained no real surprises.

What it does do however is build on its cogent analysis of the current pensions scene, current and future issues and the options for tackling them laid out in its interim report published last year. It then comes up with a well explored and reasoned set of recommendations for a future pensions settlement.

As indicated in the interim report it develops and tries to strike a balance between the 3 main ‘acceptable’ options open to us : saving more, contributing more or working longer/retiring later.

Amongst its main proposals are :-

• In return for a more generous Basic State Pension (BSP), linked to earnings, state pension age for men and women to rise to 68 by 2050.
• A ‘universal entitlement’ to the BSP based on residency for all over 75s.
• Over 75s to automatically get full state pension in the short-term.
• The State Second Pension to evolve into a flat rate payment and the abolition of opting out rights for people with personal pension schemes.
• The amount of Means Testing in the state system to be drastically reduced.
• An improved system of pension credits for the Second State Pension to help carers.
• Auto-enrollment for employees into a new National Pensions Savings Scheme into which the employer would pay 3%, the Government 1% and the employee 3%. Employees would be given an opportunity to opt out.
• Entry into the NPSS scheme would also be open to the self-employed.
• NPSS savings to be passed onto the next-of-kin if the employee dies before they can collect it.
• Pension entitlements to be built up in their own right rather than a woman’s being linked to her husband’s.

Reactions to the report were predictable. The Treasury ‘rubbished’ the Commission’s cost calculations and said the proposals were ‘unaffordable’; most employers’ groups objected to the prospect of compulsory contributions into the NPSS; the TUC were hostile to the prospect of seeing state pension age rise to 68 and the Financial Services industry objected to the prospect of the NPSS being run by the state rather than themselves.

John Hutton, the new Secretary of State at the DWP – one of whose predecessors had commissioned the report - bravely conceded that he thought the Commission’s proposals were affordable, thereby disagreeing with the Chancellor’s views and maybe limiting his future job prospects.

However, whilst most of the interested parties sought to cherry-pick the bits they liked, there does seem to be a general consensus building (amongst all but the Treasury) that the recommendations do form the basis for a framework going forward.

So now the great pensions debate begins and the Government will publish its formal response in the Spring.

Click here to see TAEN’s press release….

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Scrap Default Retirement Age To Help Facilitate Later Working Says Pensions Commission

One of the key themes of the Pensions Commission report is how to facilitate people being able to work later. It outlines some of the measures seen as critical to enable this to happen, including :-

• Having enough jobs available so that people can go on working up to, or beyond pensionable age.
• That the options available to people are as flexible as possible so that retirement becomes an extended process.

Lord Turner lists a number of key public policy levers to help achieve these
measures :-

• Age discrimination legislation
• Ensuring good financial incentives for employees to retire later
• Considering financial incentives for employers to hire post-SPA workers
• A strong policy focus on occupational health
• A strong focus on the education and training of older workers.

From TAEN’s point of view its gratifying that the Commission has taken on board and is advocating many of the policy recommendations which are so close to our own heart and which we have been campaigning for.

This includes the view that the national default retirement age of 65 to be introduced in next year’s age discrimination regulations is incompatible with the aim to help people to be able to work later and delay their eventual retirement. The Commission is recommending there should be no age at which it should remain possible to dismiss people for age-related reasons.

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ONS To Become Independent

Benjamin Disraeli, a British Prime Minister, supposedly remarked back in the 19th Century “There are lies, damn lies and statistics.” As a politician he was only too well aware of how official statistics could be distorted or bent to support or disprove government performance and policies.

Since Disraeli’s time, the gathering and use of official statistics has increased manyfold but public faith in official data has, if anything become even lower. In a recent survey only 14% of the public believed the Government used official statistics honestly.

In an attempt to counter this public cynicism, Gordon Brown has announced the Government’s intention to make the UK’s Office of National Statistics independent.
His announcement received a broad welcome, although the plans and timing still seem sketchy. Although it seems likely that an independent ONS would have some form of accountability to parliament.

Karen Dunnell, the national statistician, welcomed the announcement as “an important step forward in enhancing the integrity of official statistics.”

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‘Disability’ Label Spells Career Death

A new study from Warwick University reveals just how much stigma is still attached to disability amongst private sector employers.

Researchers collected the experiences of managers, disabled and non-disabled employees and staff representatives from 260 private sector and English local authorities.

They found that disabled people working in the private sector were often unwilling to declare themselves as disabled because it would mean ‘career death’.

They also experienced a contradiction between corporate policy and organisational practice which led to a significant degree of cynicism about their employers’ commitment to dversity.

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M&S Tops 1000 Workers Aged Over 65

Marks & Spencers, which no longer has a mandatory retirement age, now has 1,000 employees over the age of 65. This is 40 times the number they had when they first scrapped their set retirement age 3 years ago.

M&S’s Employment Policy Manager, Sally Humpage told an audience last week that scrapping their fixed retirement age had suited the company. Half of its 60,000 in-store workforce is over the age of 40.

She said, “We treat our older workers like anyone else. Many of them enjoy the social aspects of work.”

From next year all its employees aged 65 will be able to go on contributing to their pension and to have the flexibility of drawing part of their pension whilst continuing to work on part-time.

Another speaker at the Employers Forum on Age conference, Michael O’Donnell, from health insurance firm UnumProvident, told delegates:“People who give up working below the age of 60 generally die earlier than those who carry on working. Keeping active delays ageing. We needto start making retirement seem less desirable.”

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Week Starting 21st November

Hutton Lays Out 5 Principles For Pension Form

With just days to go before Lord Turner’s Pension Commission publishes its recommendations, John Hutton - the new Secretary of State at the Department for Work & Pensions – this week outlined the 5 principles by which he (and we) should judge any future pensions reform package.

They are :-

• Does the system promote personal responsibility ? The State will provide a floor in the form of the state pension which no one can fall below but the prime responsibility for security in old age must rest with individuals. Tthe Government is determined to move to achieve its goal of a 60/40 split between private and state pension provision.
• Is it fair ? Any new pension settlement must protect the poorest pensioners, must be fairer to women and carers, must tackle class inequalities and must be fair to those who save towards their own pensions.
• Is it affordable ? To taxpayers and the economy. There can no relaxation to the Government’s prudent management of the UK economy, spending on welfare has to be prioritised.
• Is it simple ? Individuals must be able to clearly understand what the state will provide so that they can make their own arrangements to top that up to provide the level of income they require for their years of retirement.
• Is it sustainable ? Any new arrangements must stand the test of time and be flexible enough to adapt to the changing needs of tomorrow’s society.

Mr Hutton said the Government would approach the forthcoming report from the Pensions Commission with an open mind and seek to secure consensus across all parties in the future.

He added, “We approach this debate with a genuinely open mind. This is the start of the debate not the end of it… We’ve ruled nothing in and we’ve ruled nothing out.”

Pity then that on the morning of John Hutton’s speech to the Institute for Public Policy Research, it emerged that Gordon Brown has already ruled out what many believe will be two of the Pension Commission’s main recommendations. Namely that the basic state pension be raised to the level of the minimum income guarantee (currently circa £109 a week) and the link between the basic state pension and earnings, rather than prices, be restored.

Informed sources say the Chancellor has decided the proposals are not affordable and will veto them. However, only time will tell whether as the Prime Minister-in- waiting, his is the only opinion which really counts on what is affordable, simple and sustainable.

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Controversial Claim About Extra Cost To Employers of Raising State Pension Age

A new report from the Cass Business School has claimed that raising the state pension age to 67 would cost employers an extra £4 billion a year in additional absenteeism costs - because according to the report, older workers take more time off due to ill health.

On closer examination it appears the approach used to arrive at this headline- grabbing £4 billion total is somewhat suspect. Its based on the difference in the projected additional costs which might arise between an assumption that average state pension age in 2025 was either 62.5 years or 67.

As state pension age for women will have risen to 65 by 2020 its hard to see how average state pension age could possibly be 2.5 years earlier some five years after the ages for men and women are equalised.

In addition to its claims of higher levels of sickness absence amongst older workers - a claim not borne out by research conducted by members of the Employers Forum on Age and others - the report also states that older workers are less productive than their younger colleagues.

The measure of productivity used is not any figure related to output at work but takes real earnings as a proxy for productivity. And because the average real earnings of people fall off once they get into their fifties, they are automatically judged to be less productive.

The author of the report, Professor Mayhew, does go on to say, “Raising the state pension age maybe a potential solution to our savings crisis but it is imperative that government understands the full implications and viability of such a move. Any increase in the state pension age needs to be supported by an integrated government approach to tackle barriers to longer working. The nation’s ability to work longerdepends upon its health, and businesses ability, and willingness, to employ older workers. It is no good raising retirement age if people are physically unable to work for longer or are discriminated against in the workplace.”

Cass Business School are calling for an independent body committed to an integrated approach across all government departments which would consider issues of health, age discrimination, employment and training, as well as pensions.

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Medium Sized Businesses Leading The Way On Recruitment

According to Manpower’s latest Employment Outlook survey, medium sized businesses are the most likely to be recruiting new staff in the run up to Christmas. Some 15% of medium sized businesses are intending to increase their headcount, as compared with 11% of large and10% of small businesses.

Mark Cahill of Manpower said the job market is still healthy enough that employees are happy to move around and employers are willing to replace to them.

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Focus On the Over Fifties

The Office of National Statistics this week updated its ‘Focus on Older People’ report.
Amongst its key findings are:-

• There were 20 million people aged over 50 in the UK in 2003, the number is projected to increase by 36% by 2031, when there will be 27.2 million people aged 50 and over.
• Employment rates for people in their 50s in Great Britain have risen in the past decade – by seven percentage points for both men and women between 1995 and 2004.
• People in their 50s are the most likely to be providing unpaid care, and for the very old, there may be barriers which prevent them from participating in a wide variety of activities. These may be financial, or related to health, or lack of transport.
• 1 in 2 people aged 50+ own their home outright - most older households in Great Britain live in owner-occupied homes. Over half owned their homes outright and just under a quarter were buying their home with a mortgage in 2003/04. The proportion of owner occupiers decreases with age from 79 per cent for the 50-64 age group to 63 per cent for those aged 85 and over.
• 3 in 5 women aged 75+ live alone - Older women were twice as likely as older men to live alone and the proportion increases with advancing age. Among women aged 75 and over who live in private households in Great Britain, 60% lived alone in 2002 compared with 29% of men of the same age.
  

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Week Starting 14th November

Trade A Better Basic State Pension For Working Longer

According to a report in the Financial Times this week, the Pensions Commission is likely to propose lifting the basic state pension but at the same time raising state pension age to help pay for it.

According to the FT’s report the Commission’s recommendations will include :-

The Commission is due to deliver its final report at the end of the month. Its chairman, Lord Turner, who had been due to speak at TAEN’s Annual Conference last month, decided to go into virtual purdah in late summer, only coming out of it briefly to deliver a speech at the TUC Conference. The BBC’s Economics Editor Evan Davies described the FT’s report as “extremely plausible”.

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Fewer Than 1 in 8 Think Their Pension Provision Will Be Adequate

A new survey commissioned by Help the Aged shows that only 13% of the adults questioned thought they’d made adequate pension provision for their retirement. More than 6 out of 10 (62%) think that their pensions will not provide enough to live on in retirement.

The survey, conducted by NFP Synergy also asked whether respondents’ felt they had worked enough years to ensure a decent pension, 38 per cent of women felt that they had not compared to just 21 per cent of men. Almost a third of women (31 per cent) conceded they had no real idea as to whether they had paid enough into their pension for it to be worth anything in the future, as opposed to just 24 per cent of men.

In a parallel report conducted by MORI for Help the Aged, one in five working adults aged 18-54 in the UK today expect the Basic State Pension to be a main source of income in retirement, with six per cent expecting to manage solely on their own savings and investments

MORI’s survey also exposes a worrying level of ignorance about the levels of retirement income with 22 per cent having absolutely no idea how much the Basic State Pension is worth per week, despite a clear future reliance on it for many of those questioned.

Michael Lake, Director General of Help the Aged commented:

“This new research shows that pension provision is exceedingly poor among today’s workforce. This can be put down to the sheer complexity of the present system. One in five think they will come to rely on basic state provision as one of their main sources of income. But that is already the case for over half of today's pensioners. Some experts have suggested that figure could rise to 70 per cent in years to come. With just days before the publication of Adair Turner’s Pensions Commission report, the case for radical reform to secure a decent, simple and fair pensions system could not be stronger.”

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Green Paper On Incapacity Benefit Reform Delayed Again

The Prime Minister told the House of Commons that the Green Paper on Incapacity Benefit Reform is now expected to be published early in the New Year. This is the third time the publication date has been deferred and reflects the fact there have been 3 different Secretaries of State at the Department of Work & Pensions during the 12 months.

The delay will give the present new incumbent, John Hutton, much needed time to come up-to-speed with his new brief.

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97% Who Reach 65 Will Celebrate their 67th Birthday

The Government Actuary’s Department (GAD) moved swiftly to rebut stories which appeared in the Daily Telegraph and Daily Mail, following leaks of the Pensions Commission’s likely recommendation that state pension age should be increased to 67.

Both papers had claimed that 1 in 5 men wouldn’t reach retirement if the age was increased.

GAD’s press release says that “Based on current mortality rates, we expect 3.4% of men and 2.1% of women who reach their 65th birthday to die before their 67th birthday. That is 96.6% of men and 97.9% of women will survive from their 65th to 67th birthdays.”

Currently 16.5% of men and 11.5% of women die before they reach 65.

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Recruitment Prospects Cool

Recruitment prospects are expected to worsen over the next 3 months. The CIPD’s latest Labour Market Outlook survey found that only a third of UK employers are expecting to actually increase staff numbers over that period. However nearly 4 out of 5 employers (79%) do intend recruiting staff between November and the end of January.

The survey also found :-

John Philpott, the CIPD’s Chief Economist commented, “The influx of Eastern European migrant workers shows no signs of waning and probably explains why the unemployment claimant count of people on Jobseekers Allowance has increased this year paradoxically alongside an increase in employment.”

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Low Job Satisfaction Can Lead to Mental Ill Health

A study of 250,000 employees by Lancaster University and Manchester Business School has shown that job satisfaction is closely linked to mental health. Low job satisfaction can lead to emotional burn-out, reduced self-esteem and depression and anxiety.

According to Professor Cary Cooper of Lancaster University Management School, a number of factors are currently affecting job satisfaction. Changing working practices and technological advances have made many jobs more inflexible and automated. At the same time, increased work loads and job insecurity are adding to stress levels.

Professor Cooper has urged employers to come up with innovative policies to tackle the consequences of job dissatisfaction and associated health problems. He points to the potential substantial economic and psychological costs of unhappy employees and says that workers who are satisfied by their jobs are more likely to be healthier as well as happier

Depression and anxiety are now the most common reasons for people starting to claim incapacity benefit, overtaking musculoskeletal problems such as back pain.

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