Raising state pension age will rub salt in the wounds of life expectancy inequalities
The Pensions Bill currently being considered by parliament will accelerate the timetable for increasing state pension age (SPA) to 67. It will now reach 67 for both men and women by 2028, compared to 2036 under current legislation.
The TUC has long argued that it is grossly unfair to increase SPA – and certainly to increase it as rapidly as the coalition government is planning – while vast inequalities in life expectancy exist. We know that inequalities in life expectancy at 65 based on both class and geography are increasing. A new report published by the TUC today (‘Life expectancy inequalities and state pension outcomes‘) shows how much this inequality will grow by 2028 – and the devastating impact it will have on state pension outcomes.
The report forecasts the continuation of current trends, amended by the expected decline in the rate of increase for average life expectancy over the period between the latest available data and 2028.
As such, we can now expect the class longevity gap (between routine/manual and managerial/professional workers) to rise from 2.6 years in 2006 to 3.1 years in 2028 for men, and from 2.4 to 3.8 for women. The geography longevity gap (between the local authority areas with the highest and lowest life expectancy at 65) will rise from 5.5 years in 2011 to 7.1 years in 2028 for men, and from 5.1 to 9 for women.
Every increase in SPA reduces (other things being equal) the portion of life spent in retirement. But because SPA is universal, the reduction is disproportionately greater among people with a lower life expectancy – rubbing salt in the wounds of unequal health outcomes.
Crucially, life expectancy inequalities also convert into significant differences in the amount of state pension income different groups can expect to receive over the course of their retirement. The report considers outcomes for people aged 65 in 2016 (when the new ‘single tier’ state pension of £144 per week is introduced) and 2028 (when SPA will reach 67).
Male managerial/professional workers can expect to receive 17.6 per cent more than routine/manual workers from 2028, compared to 16.1 per cent more than these workers from 2016. For women, the difference between managerial and manual workers will grow to 20.2 per cent from 2028, from 15.4 per cent now.
The difference in the state pension income received by workers in local areas with the highest and lowest life expectancy at 65 will be enormous by 2028. It will grow to 47.7 per cent from 37.1 per cent in 2016 for men, and 52.6 per cent from 33 per cent for women.
The TUC believes significant change is required before any further increase in state pension age is proposed. Primarily, action is required to address the health inequalities that create inequalities in life expectancy and state pension receipt. We have proposed that the Pensions Bill is used to create an independent commission on SPA, with a mandate to consider life expectancy inequalities before any future decision on SPA are made.
We also need to ensure that people have greater capacity to work for longer. Again, this is partly about health inequalities, as previous TUC research has shown that long-term illness/disability is a significant cause of inactivity among older people – occupational health should be a priority for government and employers. Further action on ending discrimination of older people in recruitment and training, and greater options for flexible working, is also required.
As well as older people’s employability, we also need to focus on wider issues within the labour market as a whole. As Tony Dolphin and Kayte Lawton of IPPR argue, unless the economy is able to sustain a higher employment rate, employers will have little incentive to adapt to the particular needs of older workers and other ‘disadvantaged’ groups.