Bringing forward the increase in the state pension age is a blunt tool to save money that will heap hardship on the vulnerable, writes ROS ALTMANN
Why are we still getting this so wrong? That was my immediate thought yesterday on reading about government plans to bring forward the increase in the state pension age.
It now seems the UK’s pensionable age could rise to 68 by 2035 – brought forward from 2046 – meaning millions more people who were born from 1968 onwards will have to wait longer to get any state pension.
These plans, expected to be unveiled in the March Budget, are likely to cause poverty among huge numbers of the country’s vulnerable older citizens.
They are a blunt and savage cost-saving tool being deployed by civil service mandarins and politicians who, of course, enjoy secure occupational pensions and are unlikely to experience the additional hardship their changes will inflict on the disadvantaged.
After years of a one-size-fits-all approach, none of this will be easy. But looking after older people after a lifetime of service is the Government’s moral duty; a duty we have to take on
I am not exaggerating. As a former Minister for Pensions in David Cameron’s Conservative Government and a long-standing pensions expert, I have long warned that continually raising the pension age would punish those – especially women – for whom the payout is a lifeline.
Now we have the data to prove it: last year, research by the Institute for Fiscal Studies revealed that the decision to increase the state pension age by a year to 66 between 2018 and 2020 caused poverty rates among 65-year-olds to more than double. It left 100,000 – or one in four of them – in poverty.
That number far outweighs the 60,000 increase in the number of 65-year-olds who managed to stay in work after the change was introduced.
And no doubt when the age limit is raised again to 67 in four years’ time, the number adversely affected will rise again – because a new tranche of vulnerable elderly people will have to wait an extra year before receiving their £185.15-a-week state pension.
These bare statistics are hardly a glowing advert for the Government’s ‘raised age’ policy, which began in 2010 and was prompted by recommendations based on increasing average life expectancy. (In fact, the Covid-19 pandemic has made a mockery of such expectations because it caused life expectancy in 2020 to fall by a year for men to 78.9 and 1.3 years for women to 82.3 years.)
My point is that a ‘one size fits all’ pension policy like this is not fit for purpose; indeed it is grossly unfair in a country whose 67 million-strong population conceals a huge difference in healthy life expectancy.
Office for National Statistics figures show that the least advantaged people in this country – the bottom 10 per cent in poverty terms – only remain in good health, on average, until around the age of 50. Yet those in the top 10 per cent can expect to be in good health until around 70.
That is a shocking 20-year difference in health expectancy, and one that is completely unrecognised by our current, horribly inflexible state-pension arrangements. There is no allowance for those who cannot work due to ill health or incapacity to be able to receive some of their pension early – even if they have contributed to the workforce for five decades. They cannot even get pension credit.
I have long warned that continually raising the pension age would punish those – especially women – for whom the payout is a lifeline
At the other end of the scale, the wealthy and healthy will be largely unaffected by the ever-rising pension age. Many can continue to work well into their 70s should they wish, increasing the value of their private pensions and enjoying the added benefit of a higher state pension when the time comes.
This is completely unacceptable when, for many, the state pension – already the lowest of any developed country – is their only income.
True, the Treasury’s state pension bill currently sits at more than £100 billion – a cost which has tripled since 2000.
But pensions are not just about economics; they are part of social policy and require a nuanced approach as opposed to the blunderbuss of elevating the age at which money is paid out.
There are certainly fairer ways to address the cost and sustainability of our state pension system. Chief among them would be to extend the number of years national insurance contributions must be paid in order to build a full state pension.
Currently, only 35 years of National Insurance contributions are needed, but this is nowhere near a full working life – those who start work at 16 will have reached 35 years’ employment by the time they are 51.
Why not extend the number of years required to 45, and raise much-needed extra revenue that way? Of course, it would mean that some people won’t get a full state pension if, for example, they arrived in the UK later in life – but it’s still fairer than the current system.
The Government should also look at more flexible arrangements for the state pension starting age, allowing pensions to be paid out at an earlier age to those who have long contribution histories and can also demonstrate poorer health.
After years of a one-size-fits-all approach, none of this will be easy. But looking after older people after a lifetime of service is the Government’s moral duty; a duty we have to take on, instead of forcing the vulnerable into poverty because others are wealthier, in better health and living longer.
Baroness Altmann was Minister of State for Pensions from May 2015 to July 2016.
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