Opinion  

Could state pension early access help address inequality?

Tom Selby

Tom Selby

Addressing inequality is one of the biggest policy challenges facing the UK government, and nowhere is the difference in outcomes between rich and poor better illustrated than through variations in life expectancy.

From 2017 to 2019 London continued to have the highest life expectancy estimates for both males (80.9 years) and females (84.7 years). London has also observed the biggest gain in life expectancy for both males (4.9 years) and females (3.9 years) since 2001 to 2003.

In the North East, on the other hand, life expectancy has ‘only’ improved by 3.3 years for men and 2.4 years for women over the same period.

North-South divide

To put it another way, someone born in the North East of England can expect to live more than 1.5 years less than the national average life expectancy, while someone born in London can expect to live more than one year above the average.

The differences are even more stark when you consider specific constituencies. Someone born in Blackpool, one of the most deprived areas of the UK, can expect to live, on average, more than 10 years less than someone born in Westminster. 

There are of course a multitude of socio-economic factors likely to be at play in shaping how long people born in different parts of the country can expect to live. These figures also do not take account of the impact of social mobility. 

Nonetheless, they give a fair indication that factors out of our control have a big impact on how long we might live for. The pandemic has exacerbated these inequalities.

The role of the state pension

Increases in the state pension age – particularly those that affected 1950s-born women – have been hugely controversial in recent years and sparked debate about the fairness of the current system. 

Currently everyone has the same state pension age of 66, with an increase to 67 planned towards the end of this decade and 68 by 2046 (although the previous government proposed accelerating this timetable to 2039). 

Clearly this system favours those most likely to live the longest, and a review into the state pension due to be completed in 2023 will consider, among other things, regional variations in life expectancy.

Allowing early state pension access at a reduced rate would potentially help address some of this unfairness for those with lower life expectancy. 

What’s more, it could be popular, with more than a third of people aged 50 to 66 saying they would consider this if it was offered as an option by the government. Offering this option could also be cost neutral for the Treasury over the long term.

However, enabling early access would add extra complexity to the system and might result in people choosing to get their state pension as early as they can, without considering the impact on their retirement plans over the longer term. 

This could also have implications for the exchequer, which would potentially face a short-term cash flow problem if lots of people decided to take their state pension before age 66.