ANALYSIS: State Pension age

This is the latest of a series of new, ten minute briefings from the National Pensioners’ Convention, which aim to give you a quick analysis of the current debates surrounding older people in the UK.

State Pension Age

Introduction
On the day Parliament went into its summer recess, the Secretary of State for Work and Pensions, David Gauke announced that the government was planning to adopt the main recommendation of the Cridland Review into the state pension age (SPA), and bring in a SPA of 68, seven years earlier than currently planned.

Under existing legislation, all those born since April 6 1978 already face a state pension age of 68, and this proposal does nothing to alter that. However, around six million people born between April 6 1970 and April 5 1978 will – if the plans are introduced – see their SPA of 67 rise incrementally to 68. This group is currently aged between 39 and 47.

The Cridland Review
Under the Pensions Act 2014, the government has the right to conduct a review of the SPA every five years. The first of these was carried out by the former CBI leader, John Cridland entitled Smoothing the Transition. The main recommendations were as follows:

• The State Pension age should rise to age 68 over a two year period starting in 2037 and ending in 2039. This brings forward the existing timescale by seven years (2044-46).
• The SPA should not increase more than one year in any ten year period.
• The triple lock on the state pension should be replaced after 2020 by a simple link to earnings.
• Access to the means-tested Pension Credit should be set one year below SPA from the point at which the increase to 68 is introduced for a defined group of people who are unable to work through ill health or because of caring responsibilities.
• The government has a responsibility to communicate directly with those affected by necessary changes to the SPA.

The Government’s proposal
Despite the government announcing their intention to set the SPA at 68 earlier than the law currently allows, this is far from being agreed by Parliament (even though the DUP has said it will back the plans). The legislation provides for the next SPA review to be conducted by July 2023, and the Department for Work and Pensions has confirmed that this is the time when the increase to 68 will need to be agreed. However, this is what the proposal would mean if it was introduced:

Too old to work, too young to retire
Of course we should celebrate the fact that social progress now enables people to live longer, but we must also recognise that the right to retire can only really be exercised when individuals have financial security as well. Otherwise working longer becomes a necessity for many and a choice for just a few.

The surprise government announcement also came just one day after a new report into poverty and ill health from Sir Michael Marmot revealed that increases in life expectancy had now come to a halt – for the first time in 100 years. The former government adviser said a century-long rise in life expectancy had stalled since 2010 when austerity brought about deep cuts in NHS and social care spending. In 2015 average life expectancy in Britain was 79.6 years for men and 83.1 years for women, according to the latest Office for National Statistics data.

The arguments against the government’s proposal are well documented:

• Raising the SPA inevitably has the greatest impact on those with shorter life expectancies, often in lower paid jobs, doing manual or stressful work, in poorer health and in the more deprived areas of the country. Therefore linking a future SPA to average life expectancy is unlikely to help those whose longevity is already low. There is no justification or evidence that the SPA should rise beyond 66.
• The significant variations in life expectancy among the population mean that the politically driven ‘one third’ policy has a more regressive effect on those who have a shorter life span, and a fairer alternative would be to base retirement policy around the number of years of healthy life expectancy. Despite lots of evidence in the report to support this, it does not appear in the recommendations.
• Not everyone will be able to continue working up to SPA through ill health and some will find themselves out of work before they reach SPA and unable to get another job in the meantime. Effectively, they will be too old for work, and too young to retire. The latest evidence shows that almost half of all long-term unemployed are over 50^[1]. These individuals should have been allowed to access Pension Credit up to five years before reaching SPA.
• Similarly, specific groups, such as disabled workers and unpaid family carers (eg. those receiving the Carer’s Allowance) should be able to access their State Pension up to five years prior to reaching SPA, without any reduction in value. The review has offered them access to Pension Credit just one year before reaching SPA.
• Suggestions that the triple lock is too generous and unaffordable ignore the very real reduction in value that the state pension suffered when the link with earnings was broken by the Conservative government in 1980. In 2010, when the triple lock was introduced, the BSP would have stood at £161.30 a week had the earnings’ link still been in place, compared to the actual figure of £97.65. This loss, including when the triple lock was in place, has never been recouped.
• For millions of future pensioners who will not benefit from generous final salary occupational pensions, the reliance on the state pension is set to grow and the need for the triple lock will therefore remain. Taking it away from existing pensioners will effectively mean future pensioners will end up working longer, paying more and getting less state pension.

Conclusion
Britain is just one of three OECD countries (the others being Ireland and the Czech Republic) that has legislated for a SPA of 68 by 2050. Pensioners and younger generations must make a clear stand for a retirement system that is more flexible and generous than that which the Cridland review or the government has suggested.