Early in the New Year the government will publish its long-heralded review of the state pension age, undoubtedly to face a winter whirlwind of controversy.
Reviewed every six years, the SPA is set to go up from 66 to 67 between 2026 and 2028 with a further change to 68 in 2037-39, but that date is not yet confirmed in law. A few proponents even suggest a retirement age of 70 – back to the dark days of 1908?
A further and earlier rise in SPA is largely regarded as inevitable by most pension professionals; more than 11mn people – 18.6 per cent of the total population – are over 65 (2021 census), including over half a million (527,900) people who are more than 90-years-old.
In 1950, the average age of exit from the labour force of men was 67.2 years old and the school leaving age was 15 – a working life of 52 years.
Today, half the population starts work at 21 and generally works a maximum of 45 years. Five years’ lost tax and national insurance revenue while people live longer lives. Something has to give.
The state pension is the largest single item of welfare spending at £104.5bn (2021-22), making up 41 per cent of welfare expenditure (2020-21). With huge demand from the NHS to education, HM Treasury will push for at very least staying on track with the present timetable.
I remember George Osborne boasting that delay in SPA was his biggest ever cost saving measure. The new dates could be confirmed as early as the March Budget.
Any decision will have profound implications for society, employers, advisers and individuals.
Even today, many manual workers can rarely work beyond 55. Sadly, many people leave the workforce by the time they are 50. In theory, you can plan precisely your retirement date to a nicety but ill health, disability and redundancy all take their toll.
David Hearne, chartered financial planner at Financial Planning Partners, hits the nail on the head when he says: “One of the most important aspects of planning for retirement is not just saving more money, it’s hitting your 50s with a job you enjoy that isn’t physically demanding and can be done without a full-time commitment.”
Lifelong learning
If the SPA rises, billions and billions of pounds will be saved. The government should spend a good chunk of this on retraining mature adults. The cost of evening education and university prevents up-skilling of the workforce.
Recently just one evening class in GCSE German cost me £400; heaven forbid a mum wants to retrain as a nurse in her 50s or an electrician begins an IT degree to retrain as a computer programmer. Subsidising lifelong learning is the key to using one of our biggest resources – the older generation – for the benefit of everyone.
Employers’ duty of care
Employers more than ever have a moral responsibility to their employees – it is shocking that a recent Office for National Statistics sample of 2.1mn inactive or unemployed adults aged 50 to 54-years-old found 19 per cent left their jobs because of stress.
A further 17 per cent left because they felt unsupported by their bosses. Only 49 per cent were debt-free (excluding a mortgage) – such a waste of talent and loss of wealth, both to the nation and their household.
If SPA becomes nearly 70, employers must no longer edge people out of the door at 50 but retrain them – not put them on the scrap heap.
It should also become a legal requirement to provide financial guidance and better still regulated financial advice as a standard employee benefit at all firms with more than 100 employees.
What goes around, comes around
Employers have largely farmed off pension risk to their employees who also face a cost of living crisis and some have a battle with poor mental health related to debt and financial worry. They need financial advice.
I am not alone in advocating this; 20 years ago The Actuarial Profession’s report “In Place of Micawber: Empowering Financial Consumers”, advocated free, confidential financial advice as part of the employment contract at a rate of two hours a year, per employee. Whatever happened to that report?
Employers offering free financial advice (just a couple of hours a year) would gain from being seen as caring and supportive. They would also attract and retain a better calibre of staff. The advantages are obvious for workers.
And for IFAs, it could be a new opportunity to help create the financially secure workforce that Britain needs today. They can then look forward to tomorrow free of fear, regardless of the impending SPA decision.
Stephanie Hawthorne is a freelance journalist
