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20 August 2019

Increasing the state pension age to 75 is a terrible, divisive idea

A simplistic plan to save money would bring hardship to those least able to cope.

By Ros Altmann

It is rare that I see a proposal as potentially damaging as the recommendation, just published by the Centre for Social Justice, to dramatically increase the state pension age – to 70 by 2028 and then to 75 a few years later. This flawed policy thinking suggests little understanding of the role and impact of state pensions and the differentials within our society. It must be dismissed immediately before it is adopted by politicians looking for seemingly easy benefits.

To force everyone to wait longer for their state pension on the basis of rising average life expectancy is unjust, particularly since healthy life expectancy – the average number of years that an individual is expected to live in a state of good health, based on current mortality and health rates – can vary across different regions in the UK by over 15 years. A pension age increase of this scale would mean many people – such as those whose careers involved heavy manual labour, or who are less well-off or who are in poor health – would never receive their state pension, despite having contributed decades of National Insurance payments.

Even current state pension policy fails to recognise that those in the most deprived areas tend to die younger and spend more of their later years in ill health. Raising the pension age still further would cause unwarranted hardship for the most vulnerable older people.

The UK’s state pension is the lowest in the developed world, and it already discriminates on grounds of age and health. Anyone healthy and wealthy enough to wait beyond minimum state pension age can achieve a higher state pension. However, those who are genuinely too ill to work cannot get a penny of state pension earlier, even after paying National Insurance for 45 years or more.

Yes, working longer can be beneficial for people’s health and wellbeing – but not for everyone. A significant minority of the population is simply not well enough to carry on. And those who leave work to provide unpaid care for loved ones should not be denied proper support. Policy should be about encouraging a longer working life, not callously forcing it on people who cannot cope.

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And yes, increasing the state pension age could increase GDP while saving on benefit spending as the population ages. But recent radical state pension reforms were said to ensure long-term sustainability for state pension costs. Has Brexit impoverished our future so rapidly that further substantial spending cuts are suddenly needed?

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We need to get away from the idea of one “magic age” beyond which people won’t be expected to work. Other factors, beyond a stark chronological age cut-off, could be used to determine eligibility, incorporating flexibility for individual differences. For example, length of contributions to National Insurance, health status, unpaid caring and part-time work could all permit eligibility to state pensions earlier if needed.

Rather than continually raising the minimum age, the government should focus on overcoming workplace ageism and providing retraining for people who have not reached current state pension age. There are currently more than a million over-50s wanting to work, who can’t find a job and recent pension age rises have not helped them. Only once policymakers have successfully devised successful support measures for those below present state pension age, should further increases be considered. If employment is not available, or people are unwell before age 75, many would languish on “working age” benefits or be forced to work until they drop to make ends meet. This is not the mark of a civilised society.

Nor would this policy only affect the state pension itself. Reaching state pension age is a passport to other benefits, so increasing the age would force older people to wait longer for those too. Pension Credit, needed by the poorest pensioners, was paid from age 60 until recently, but the minimum age is now approaching 66, despite many over-60s being genuinely unable to work. These people must rely on Universal Credit, requiring them to undergo work assessment tests and apply for work, even if they cannot manage. These payments are much less generous than state pension, in order to “encourage” people into work. Once they are in the retirement age zone, however, this is more like forced labour than social support.

The Centre for Social Justice, chaired by former work and pensions secretary, Iain Duncan Smith, has significant influence in the Conservative Party.  Another huge welfare reform, Universal Credit, was based on a 2009 CSJ paper. But this recommendation would be politically disastrous for the Conservatives – causing damage similar to that of the 2017 general election manifesto proposals for social care reform, which likely cost the government its majority.

We have seen how recent increases in women’s state pension age were mismanaged and poorly communicated, creating hardship for a generation of women who were never told the state pension they expected at 60 would be delayed. Duncan Smith was in charge of pensions policy when the second increase in women’s pension age was pushed through parliament, ignoring warnings of myself and others about the problems such short notice changes would cause.

The ageing society demands a more flexible, more equal system, not one that penalises the poorest and most vulnerable older citizens.