State pension age – will they dare to raise it again?

Publication

Chris Ball wrote for the Unions21 publication: The Generation Game, Does Age Matter?

At some point during the Conservative conference, the issue of working longer before retirement may come up. (How could it not with George Osborne deciding that £10 billion of additional welfare cuts will have to be found?)

 

There are several reasons to doubt that it would be easy to deal with the debt crisis by pushing up state pension age more quickly however. Yet, as this approach is being followed in several other European countries we should be ready for it. One argument which will be used will be the increasing ageing of society.

 

Sadly, at present the naïve idea that demographic change means we can automatically look forward to years of working longer is going largely unchallenged. Demographic change alone cannot possibly determine our ability to work.

 

Today’s news reports suggest that the burden of further cuts will fall on the working age poor and on the face of it – the young. The Guardian says that first targets are likely to include housing benefits for the under 25s and removing extra benefits from claimant parents who have an additional child.

 

There will be some who will emphasize the need for intergenerational equity in the distribution of hardship. Since bus passes and winter fuel allowances seem to be off limits, looking again at age of entitlement to state pension may have its attractions.

 

One advantage is that raising the SPA doesn’t impact on anyone right away – this is all about pain tomorrow. Secondly, existing pensioners, holders of the grey vote, will not be affected.

 

There may be good reasons not to meddle further but it would be surprising if, in the fetid atmosphere of increasingly stoked up inter-generational conflict, someone in the David Willets circle of thought does not suggest looking again at raising SPA  more quickly.

 

(Willets, it will be recalled, in his book The Pinch, has argued that the baby boomer generation has squandered its children’s inheritance and should pay the price.)

 

A report issued by PwC last year argued that a state pension age of 70 introduced by 2046 (rather than the 68 which is currently planned) would be necessary to reduce public debt.

 

As things stand, by April 2028 everyone will have to wait until they are 67 for their state pension. However, in the 2012 Budget, George Osborne confirmed that the Government would use an Office for Budget Responsibility report to create a solid link between the state pension age and rising life expectancy.

 

The report was due this summer but is still anticipated. When it appears it is thought likely to pave the way for the state pension age rise to 70 and beyond.

 

The question is how soon will this be? For every year that the SPA is delayed the treasury saves around £13 billion so the temptation will be to accelerate further increases. Bringing SPA at 70 forward to 2046 would be a reasonable guess but an even faster track may be chosen.

 

In response to arguments that any accelerated increase is too fast and will hit older people hard, Government spokespeople will no doubt cite the trend in the numbers of people already working longer.

 

While it is certainly true that the number of people aged 65 and over in paid work in the UK has risen to another new record there is hardship in the labour market for older job seekers who suffer the biggest problem of any age cohort with long term unemployment.

 

Moreover, there is a huge number – over thirty per cent – of the 50-64 age group who are classified as “economically inactive” – not available for work or seeking work.

 

Against this background, raising state pension ages to 70 seems frankly unrealistic. We could easily have two thirds of the 65-70 year olds age group unable to claim their state pensions yet unable to work. Given the low level of personal savings this would indeed be problematic.

 

A further issue is that little is being done by employers at present to address the issues of working longer. Sadly, in many organisations the ageing workforce is seen as a headache rather than an asset. Some employers see the value in retaining older workers with skill and knowhow but few think of hiring them.

 

Much less so if they have not had direct experience in the same job role and the same sector.

 

Too little is being done by employers to adapt methods and patterns of working to suit older workers while the idea of looking at work-life over the longer term so that people remain work-able and employable seems not to have caught on.

 

The number of UK organisations embracing strategic “age management” responses to workforce ageing is infinitesimal.  In contrast, the best examples of such programmes in countries such as Germany, Finland, Sweden and the Netherlands are impressive.

 

If and when the issue of accelerating the increase in SPA again is raised it will be interesting to know what the Government will do about employers that fail to invest in skills and career development throughout employees’ working lives and ignore the challenges of maintaining health and well being.

 

It is unconvincing to “celebrate,” as Government ministers are wont to do, the remarkable achievement of increased longevity, if we can only look forward to living longer but are practically unable to work longer.

 

 

 

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One Response to “State pension age – will they dare to raise it again?”

  1. Chris Ball says:

    Monica you can follow my TAEN age and employment blogs on http://www.taen.org.uk or follow us on twitter @taen_uk

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