In the DWP’s post Autumn Statement , statement there is an interesting paragraph about the review of the state pension age, the upshot of which is that we will have to wait a few more months for Lucy Neville Rolfe’s report to be published.
The State Pension age is legislated to increase over the next 25 years. There is currently a Review of the State Pension age being carried out, which is considering whether the existing timetable remains appropriate. The Secretary of State for Work and Pensions will publish the Government’s Review of the State Pension age in early 2023.The Review will need to carefully balance important factors, including fiscal sustainability, the economic context, the latest life expectancy data and fairness both to pensioners and taxpayers.
Compare and contrast popular opinion on what it’s likely to propose with the careful language of the DWP. Here’s the FT’s new correspondent Moira O’Neill’s take on the likely outcome of the review.
Amazing to tell you that @MoiraONeill is back in the FT fold (hurrah!) “Anyone under 50 should expect their state pension start date to be pushed to age 70 and, in the case of the under-45s, possibly age 75″😱 https://t.co/T7xK7WuIMZ
— Claer Barrett (@ClaerB) November 19, 2022
So let’s unpack that DWP statement and see
Fiscal sustainability, is the ability of a government to sustain its current spending, tax and other policies in the long term.
The State Pension is one of the lowest in the G20 and is currently being restored to something like parity with those of other developed nations via the triple-lock. We have a demographic problem which is to do with fertility, we do not have enough people being born in this country to replace those retiring. Set against this the reality that Britain remains a popular place for economic migration that means we have “adopted workers”. The fertility/immigration issue is far from straightforward and does not point to an automatic increase in state pensions.
The economic context
A strategic review of the state pension age should focus on fundamentals and not the current economic climate. Unless that is – that the current economic climate is a result in a fundamental weakness or strength in the economy (rather than short-term issues like wars and plague). Whether we can afford to increase or retain the current state pension is less a matter of economic context as political imperative . Though the dire state of this country’s finances does suggest that we may have to increase the state pension age, the fundamentals of the economy suggest Britain is still a relatively prosperous nation, economically well managed (by and large). Again there is no certain pointer to increase.
The latest life expectancy data
Although the long term longevity trend is upwards ( we will expect to live longer). The short term numbers suggest a levelling off in the long term trend and a current reversal in the UK
ONS deaths data has been released for week ending 4 Nov.
1,904 more deaths were recorded in-week compared to the 2015-19 average. That’s 19% more, which is another significant excess.
Year-to-date there have been 482,859 deaths recorded which is 8% more than the 2015-19 avg. pic.twitter.com/dRvnzYNXp2
— stuart mcdonald (@ActuaryByDay) November 15, 2022
Indeed, the pensions consultancy LCP has argued that in the light of recent evidence from the CMI , Club Vita and the ONS , the state pension age should actually be reduced so that those currently awaiting an increase to 67, might retire at 66.
Again there is no conclusive evidence for the state pension age to rise, resulting from longevity statistics.
Fairness both to pensioners and taxpayers.
“Fairness” is such an emotive word that politicians can use it to argue for whatever they like in terms of pensions. Is it the young paying for the old – when the state pension age is retained or are the old currently unsupported – relative to the prosperity that the young will find from a booming economy (sic)?
The perception that no-one under the age 30 votes conservative and no one over 30 votes Labour is clearly prejudice, but it is politically charged prejudice.
Pensioners are not hugely rich as a whole, but we have a great chasm of wealth between the haves and the have nots (mainly based on whether you worked for an employer that offered a defined benefit scheme).
So the proper differentiation is between the well-off pensioner and the struggling tax-payer which argues for a means tested state pension like happens in Australia.
We are unlikely to have means testing other than in benefits (pension credit). Again the question of fairness does not lead to a conclusion one way or another.
My take on the likely direction of the state pension
Under Boris Johnson or Liz Truss, I would have expected the state pension age to increase, under Rishi Sunak , I am not so sure. Some genuine responsibility has returned to Government.
It is easy to agree with Stephanie – but I actually lean towards the view of Andy Young, who has at least done the job of Government Actuary to the DWP.
My bet is it will either say (1) all factors too uncertain and wait for next review. (2) on basis of financial expectations (reducing the importance of mortality on its own) move sooner to 68 and higher. Radical would be also to allow 67 but on a reduced rate.
— andrew young (@glesgabrighton) November 19, 2022
Here is the link that allows you to find out when you can access your state pension
No, it will be like petrol stations. If the sign says 169p, people will swing in and fill up. But if the station moves it to 170p, that sounds a lot more and people will drive on past to another filling station.
Politicians are canny and will not be advertising age 70 in their manifestos.
69 years 11 months.