PENSIONSANDSAVINGS.COM

12 reasons why raising State Pension Age to 71 by 2040, suggested by today’s ILC Report, is unconscionable and favours well-pensioned higher income groups. 

1. Anyone in their early-fifties and younger would be caught by this proposal – plunging more into poverty in later life.
2. Only the top 10% of the UK population stay healthy to their early 70s.
3. Cutting costs by making unwell workers wait longer, favours the well-pensioned higher paid.
4. The State Pension is part of every worker’s social contract
5. Private pension coverage is still too uneven to support increasing State Pension Age just because ‘average’ life expectancy is rising.
6. Chronological age is too inflexible as a unique criterion of eligibility for a State Pension.
7. NHS does not yet support this policy as there are big differentials in health across the country.
8. UK labour market is not prepared for this either due to ageism.
9. Encouraging more part-time work before full retirement could alleviate State Pension cost pressures.
10. Increasing the number of years of NI for full State Pension could cut costs and recognise societal differences.
11. Pension Credit rules should be relaxed too.
12. State Pension policy is a political choice:

 

Here are the details:

1. Anyone in their early-fifties and younger would be caught by this proposal – plunging more into poverty in later life. The rise in State Pension Age to 66 has already caused increased poverty among 65 year-olds. Further rises, without offsetting flexibilities, would cause more poverty for those without good private pensions who are often in poorer health– see IFS report here showing one in four 65-year olds in poverty. https://ifs.org.uk/news/latest-increase-state-pension-age-65-66-led-income-poverty-rates-among-65-year-olds-more .
2. Only the top 10% of the UK population stay healthy to their early 70s. Therefore, social policy needs to recognise that the majority of the population are not well by their mid-sixties – ONS figures show the bottom 40% of men and women only stay healthy on average to around age 61 or 62. https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthinequalities/bulletins/healthstatelifeexpectanciesbyindexofmultipledeprivationimd/2018to2020#healthy-life-expectancy-at-birth-by-the-english-index-of-multiple-deprivation
3. Cutting costs by making unwell workers wait longer, favours the well-pensioned higher paid. Disadvantaging more middle and lower social groups, while benefitting well-pensioned higher earners, is not the way to run an equitable social welfare system. It would increasingly skew State Pension spending towards better off, older people, who can afford to wait longer and tend to live longer, while disadvantaging the majority.
4. The State Pension is part of every worker’s social contract.  They and their employer have to pay significant amounts of National Insurance, in order to insure themselves for the basic minimum state pension support in future, once they cannot work. That is the social deal. The State Pension is still the bedrock of social support and chronological age is not a fair determinant to use for cost-cutting decisions, due to significant individual differences. It should be unconscionable to pull the rug from under those who are least healthy and have very little private pension as they get older, so they suddenly find they must wait ever longer before they can receive even a penny of the State Pension for which they paid National Insurance.
5. Private pension coverage is still too uneven to support increasing State Pension Age just because ‘average’ life expectancy is rising. Despite Government spending over £70billion a year on tax and NI reliefs for private pensions and auto-enrolment, so far a great success in increasing coverage of private workplace pensions, millions of people still have little or no private pension. Those in their early-fifties or younger will not necessarily have time to ensure a private pension can bridge the gap between having to stop work and receiving state pension income. Many would be forced to keep waiting longer to start receiving their state pension, regardless of their health or length of National insurance record.
6. Chronological age is too inflexible as a unique criterion of eligibility for a State Pension. Just raising the State Pension starting age is a blunt cost-cutting tool that hits the poorest and least healthy hardest, while the better off are relatively unaffected – and if they are healthy and wealthy enough to wait longer, can get an even higher state pension at older ages. Policy must consider other ways to save money, which help ensure greater fairness and flexibility for State Pensions. For example, length of NI record or health conditions can be considered.
7. NHS does not yet support this policy as there are big differentials in health across the country. Until the Government succeeds in improving NHS preventive health measures so the service becomes one that focusses more on keeping people healthy for longer, just continuing to increase the starting age for state pensions will leave increasing numbers of sixty-somethings at risk of being forced to work despite ill-health, or living on the breadline.
8. UK labour market is not prepared for this either due to ageism. Government is trying to encourage and enable longer working lives, but there is a long way to go.  It must help more employers to retain, retrain and recruit older workers, who still face ageism in the workplace and are too often stereotyped as being too old or about to retire, so they are ‘managed out’, or overlooked for in-work training and ignored in recruitment. While sixty-somethings still face discrimination in the workplace, forcing them all to wait longer for their state pension to start, leaves them at risk of unemployment.
9. Encouraging more part-time work before full retirement could alleviate State Pension cost pressures. Chronological age does not predict fitness to work. There are significant benefits to working longer for some, but those too ill should not be left languishing on out of work benefits, or forced to work full-time to make ends meet. Longer working life can be a win-win for individuals, society and the economy, boosting growth, incomes and pensions. However, just considering the rise in average life expectancy to decide state pension starting age is too brutal. The social welfare system should recognise the differentials in health and work ability between different groups. There needs to be more flexibility for early pension payment to those who genuinely cannot work.
10. Increasing the number of years of NI for full State Pension could cut costs and recognise societal differences. Only 35 years of National Insurance are needed for a full State Pension. This is certainly not a full working life in the 21^st century. Those starting work at 16 could have built up more than 50 years by their late-60s. The Government would reduce State Pension costs by, for example, requiring 45 years for a full state pension rather than just 35. This rewards those who have paid in for more years and improves sustainability, social equity and affordability – unlike just raising to 71.
11. Pension Credit rules should be relaxed too. The starting age for Pension Credit – which is the means-tested top-up for people over State Pension age whose incomes are inadequate to avoid poverty – has risen in line with State Pension age itself. Also, the qualification criteria have been tightened, so that fewer people qualify. At the very least, policymakers must consider relaxing Pension Credit rules to allow means-tested support from an earlier age. So far, the increases in State Pension age means low income, least healthy sixty-somethings have been neglected by policymakers and cannot even receive reduced ill-health payments early. It is hardly a comfort to those who are too ill to work to know they may get more when they reach the ever-rising age. Many may not live that long, or will be pushed into poverty in the meantime.
12. State Pension policy is a political choice:  With the lowest state pension in the developed world, affordability is not a deciding factor – the decision is about where to prioritise spending. I believe older people deserve fairer retirement support and the costs could come from other reforms, rather than just taking away crucial welfare support from less well-off groups.