Torsten Bell has tough choices to make on the state pension.
The state pension age matters to everyone still to get it.
I worked most of my life expecting to receive my state pension when I’d be 65; I’d be a pensioner in 8 months time had that conjecture held true. But my state pension age increased to 66 and then a 2020 review raised it to 67 so I have two years to wait.
I can put up with it, I’m still working and can balance not being a pensioner against having another 25 years to live (I live in a posh place). But not everyone is as lucky as me; people in Oldham have seen their life expectancy fall over the past few years. For one reason or another, many people in poor areas do not receive the full state pension.
Why should I expect the same pension when I’ll receive it for a longer period and have had the chance to save all my life into personal and company pensions? This opportunity has meant I’m doing well.
Shouldn’t what the state pays out be based on people’s means and how adequate their pension is?
Should I have the same state pension age as someone my age in Oldham?
These are the kind of questions Baroness Jeannie Drake has to consider as she conducts the first part of her Pensions Commission’s study into adequacy of income in later life.
If we followed Australia, we would have a means-tested state pension which would only be paid to those with little or no income in later life; but this would complicate things still further. This chart shows how many state pension ages those in their fifties and sixties could have had; try means-testing that!
We still have Baroness Rolfe’s suggestions on an increased state pension – ignored by the last Government and we have suggestions to come on future state pension ages from Dr Suzy Morrissey.
How much more complicated could this chart become?
The rate the state pension increases matters most to my 93 year old Mum
It is amazing that four out of five people swapping their pension pot for an annuity don’t buy and increase to the lifetime income they buy
Though we seem obsessed by the rate of increase of our state pension, we are still four times as likely to buy a pension with no increase in payments than one linked to a formula for increasing!
Sourced by Retirement Line https://www.retirementline.co.uk/blog/analysing-the-fca-annuity-data-for-2024-2025/
This brings me to my central question.
” Does the state pension age matter more than future increases?”
I think that people’s attitude towards pensions in general but the state pension in particular is based on immediate need. Annuities, like the state pension, are judged by the income they pay at the outset. People engage with the payment today, not future increases in the state pension.
The most important thing to most people is when it comes into payment. You don’t have to go back far in time to remember WASPI and the delays women suffered when their expectation of a state pension age was 60. The Government’s lesson for today is to keep people informed of why changes are happening and manage expectations.
As far as increases to state pensions, I suspect that people lock in to the current rate of state pension and imagine it as what they get, increases are a bonus because people expect pensions (like annuities) to be level. They like the certainty of the state pension.
For that reason, Torsten Bell is hinting that he will drop the one of the triple locks – reducing pension increases. Meanwhile he hints he won’t support the most drastic proposed increases in the state pension age.
Of course there are exceptions, my Mum (now a pensioner for 34 years) is very interested in pension increases! But pensioners, despite being good at voting, are not as productive to the exchequer as we workers !
If the Government is constrained, then it is better to freeze state pension ages than to continue triple-locked state pension increases.
