Sensible decision to leave State Pension Age timetable unchanged for now
- Leaving State Pension Age alone for now is the right decision.
- Accelerating Sstate Pension Age rises would be wrong when life expectancy increases have slowed or possibly reversed and huge differentials in healthy life expectancy remain.
- Retirement support should not be determined just by chronological age – health, length of National Insurance record and income could be included.
- Early access to Pension Credit would be another way to avoid rising old age poverty.
Welcome News: I am delighted that the State Pension Age review will not lead to an acceleration of the rises in State Pension Age already legislated for.
Wait and see what happens to post-Covid life expectancy: The Government is right to recommend a wait and see approach, with further studies to understand better the full impact of both Covid – and the consequential backlogs in the healthcare system – on previous forecasts for life expectancy. A proper study, to be carried out in the next couple of years, will provide more essential information on which to base this important element of British welfare policy.
Rise to 66 caused more poverty for 65 year-olds who couldn’t work: Of course there is pressure on the public purse and the ageing population will inevitably mean higher pension spending, but the State Pension is a fundamental part of our country’s social insurance arrangements and millions of citizens are already struggling in poverty after the rise in State Pension Age to 66, with the increase to 67 starting in just three years’ time. Here is the IFS report showing rise in poverty for 65 year-olds: https://ifs.org.uk/news/latest-increase-state-pension-age-65-66-led-income-poverty-rates-among-65-year-olds-more
Huge differentials in healthy life expectancy should not be ignored: With doubts having been raised about the trajectory of life expectancy forecasts, as well as the evidence of huge differentials across the country in healthy life expectancy, I do not believe it is safe to accelerate the rise in State Pension Age unless it also introduces more flexibility to the starting age – in order to recognise that less than half the population, according to official statistics, are still in good health in their mid-sixties.
Welfare policy should not just be about cost-cutting: Cutting costs would be the only reason to press ahead with accelerating the State Pension Age timetable and I am pleased to see this factor has not overridden social concerns.
There is more than the usual degree of uncertainty about trends in life expectancy: Since 2019, the expected increases have not materialised and, indeed, for those already in their fifties, life expectancy has fallen. It is, therefore, right that Government waits for more evidence. The trends are of course partly impacted by the pandemic’s effect on older people, but the ongoing NHS backlogs and crisis in elderly care may prevent a sudden resumption of life expectancy rises – as well as leaving those in their fifties or sixties in poor health for longer. The costs of long-term state pension provision may already be over-estimated and it would be right to wait and see what impact the post-pandemic period has on overall life expectancy – and indeed healthy life expectancy – before pressing ahead with changes.
What alternatives could the government consider? Rather than ploughing ahead with plans to bring forward the rise to 68 to the 2030s instead of the 2040s, there are other ways of controlling State Pension spending, which seem better suited to the reality of our population.
Age may be simplest tool but is too blunt a tool: Using chronological age may be the simplest policy tool, but it is, in my view, not the best or fairest one.
Flexibility for starting age could apply for health and contribution record: Having a more individualised approach would recognise the reality of the UK population and work-ability. Allowing some flexibility for state pension starting date, to recognise adding additional factors such as differing health across the UK, or factoring the length of each person’s National Insurance record into the equation, would contribute to a fairer system, rather than pushing those who are genuinely too ill to work into poverty while waiting for any state pension to which they may have even contributed for over 50 years.
Tying Pension Credit starting age to State Pension Age could also be reconsidered: By constantly increasing the state pension starting age and increasing Pension Credit starting age in line with this too, many of our citizens in poor health are left in poverty, even if they have contributed for 40 or 50 years to National Insurance. However unwell they are and regardless of whether they have any private pension or other savings, they cannot get any of the State Pension sooner than the ever-rising age, just because ‘average’ life expectancy is forecast to rise.
The top ten percent of the population do stay healthy into their early 70s:,The ONS figures highlight that there are huge differences in health across the country. The top ten per cent of older people will still be healthy into their early-seventies. For them a delay in starting to receive their State Pension will not matter much – especially as the State Pension itself is the lowest in the developed world and so many of this top group will have private pensions they can use if they do not wish to wait.
But more than half the population are no longer healthy in their mid-sixties: The official figures also show that on average, 60% of the population are no longer healthy when they reach their early- or mid-60s. See Table below. Those with a private pension could use this to tide them over till a later state pension age, but those in poorest health are often low earners who did not have private pension provision while working. At the very least, provision should be made for early applications for Pension Credit, so that those who have no other money to fall back on are not excluded or even pass away before receiving any pension.
ONS figures healthy life expectancy age by quintiles 2018-20
| Men | Women | |
| Bottom 20% – Quintile 1 | 54.2 | 53.3 |
| Next 20% – Quintile 2 | 58.1 | 59.2 |
| Next 20% – Quintile 3 | 61.4 | 62.2 |
| Next 20% – Quintile 4 | 65.4 | 65.9 |
| Top 20% = Quintile 5 | 67.6 | 70.2 |
Here is a link to the ONS report showing differences in healthy life expectancy: https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthinequalities/bulletins/healthstatelifeexpectanciesbyindexofmultipledeprivationimd/2018to2020#healthy-life-expectancy-at-birth-by-the-english-index-of-multiple-deprivation
3 thoughts on “Sensible decision to leave State Pension Age timetable unchanged for now”
Does the wonderful maxime associated with life assurance also apply to pensions in so far as it is: “the contributions of many for the losses of a few”?
But are the losses as far as the the state pension is concerned, the ones who unfortunately die before they reach pension age, along with any surviving spouses?
Or could the losses here be the contributors for the state pension who have to fund those who claim their state pension to very ripe old ages, e.g. of 95 years?
If the workforce is going to need to be expanded to fill the required job vacancies now and in the future, might it be better to attract younger people into the workface, rather than trying to hang on to the oldest for too long and against their will?
For instance, the recently discussed prospect of having 18 year old employees becoming members of workplace pension schemes.
Obviously not good to stop the best students from achieving their academic potential and doing their degrees. But to some teenagers after obtaining their “A” levels, the prospect of them having a sound professional type career with a good early starting contributions in a pension scheme and without a university large personal debt, could be a very useful and tempting alternative to university.
Perhaps suitable employers could really make something of this by having special recruitment schemes for those with “A” levels and aged around 18 years instead of having so many post graduate recruitment schemes.
Could the current age exemptions with workplace pension schemes be seen as an anomoly? Due to state pension national insurance credits continuing after many decardes to be readily contrinbuted for 16 year olds?
Are there risks that the UK is becoming rather too simular to the USA with their undeniable influence?
For example, American based giant employers operating in the UK will often have workplace pension schemes with comparatively very low employer and employee contributions. Contrast those with the often reported 27% employer contribution with the civil service.
Is there a prospect that more UK firms might follow the example of not having an annual pay rise, preferring to opt more for paying an annual non consolidated lump sum, which is heavily performance based?
Similarly, will more and more UK employers follow the USA employers example and not move their employees through an attainable salary band with minima and maxima, via annual increments?
Interesting comments. Thanks.
An excellent blog, Ros and given you’re a Tory Peer. Your comment that “on average, 60% of the population are no longer healthy when they reach their early- or mid-60” gives pause for thought. I noted that today’s Guardian referred to you as an Independent. I hope that wasn’t a typical Grauniad typo. Keep up the good work!