Is the state pension age really going up?
The state pension age is set to rise. In the 2011 Autumn Statement the Chancellor announced that the Government intended to bring forward a previously announced increase in the State Pension age to 67, which would be phased in between 2026 and 2028. The DWP’s timetable for these changes can be found here.
Today’s headlines suggested that this timetable was set to be subject to further change, with increases to 69 and 70 on the cards for many of today’s young workers.
But despite the spin has a new timetable actually been announced? It appears not. The legislative timetable for existing rises remains as it was. The only new development has been publication of a background note from DWP which sets out the principles which will underpin further rises. In so far as there is a new announcement, it is the statement in this note that:
the government’s position that people should spend, on average, up to one third of their adult life drawing a State Pension
But importantly, the note does not rip up the previously announced timetable. The approach it sets out will be used to determine how further rises are determined, but these will not be before the next parliament, following the first of the reviews that are currently being legislated for in the Pensions Bill.
These reviews will also, as the note sets out, not only take note of changes in life expectancy, but will also include reference to wider evidence. As the DWP says:
As well as the Government Actuary’s report on longevity, a person independent of government will be commissioned to lead a report on other factors relevant to setting State Pension age. The government anticipates that these other factors will include, for example, healthy life expectancy, and differences in life expectancy between socio-economic groups. The review will seek to give individuals affected by changes to their State Pension age at least ten years’ notice. As now, any future changes to State Pension age will have to be made law through primary legislation and will therefore be subject to the full scrutiny of Parliament.
But with ONS life expectancy projections going up, will the next review lead to an inevitable increase in the state pension age? The DWP remain equivocal stating that:
It is likely that the State Pension age review, to be conducted early in the next Parliament, will be based on ONS life expectancy projections published in 2015, which may or may not yield a different date. As mentioned above, the State Pension age review will consider not only life expectancy, but also other relevant factors, and any proposed changes to the State Pension age will still have to be put in primary legislation and receive the approval of Parliament before becoming law.
This is particularly intriguing, given the Chancellor’s statement earlier that:
Based on latest life expectancy figures, applying that principle would mean an increase in the state pension age to 68 in the mid 2030s and to 69 in the late 2040s. The exact dates will be set by the future statutory reviews and in line with the most up to date demographic data, of which the next update is published next week. This is one of those difficult decisions governments have to take if they’re serious about controlling the public finances. Future taxpayers will be saved around £500 billion pounds.
Perhaps some parts of government are keener than others to rely purely on a formuale.
Of course unions still oppose increases that have been announced to date, and will be far from satisfied with proposals for determining how future increases are calculated. As TUC research has shown there are still significant inequalities in life expectancy across the UK, and with many workers reaching state pension age already disabled making people wait longer for pensions will, in many cases, extend people’s time on out of work benefits rather than in paid work.
In 2012 TUC Congress resolved to oppose further increases, as well as campaigning, if government chooses to go ahead with raising the state pension age, for the establishment of an independent commission which would include union representation with the statutory responsibility for determining the SPA and early retirement age. The TUC proposal is that such a commission be charged with taking into account clear criteria including occupational effects, such as shift-working, on longevity, the open collection of evidence and public consultation, with the objective of sharing the proceeds of economic growth fairly among those of working-age and retired individuals. As the government proceeds with plans to review the state pension age further, we will continue to lobby for such changes in approach.
But today, while it appears that many workers may still have to wait longer before they get a state pension, the scale of future increases is – rather than being as settled as the Chancellor may have suggested – still up for debate.