Should anyone care that the state pension age is set to increase?
Will it really have any relevance when the concept of retirement has become so fluid? When more than one in 10 people over the age of 65 are registered by the Office for National Statistics as employed?
The answer is that we should all care about the state pension age increasing, some more than others, including those people who have personal pension arrangements.
From December 2018, the state pension age is scheduled to increase for both men and women, until it reaches 66 by October 2020. It is also planned to rise from 66 to 67 between 2026 and 2028.
In addition, in July 2017 the Department for Work and Pensions said in the State Pension Age Review: “The government intends to increase the state pension age from 67 to 68 in 2037 to 2039, bringing it forward by seven years from its current legislated date of 2044 to 2046.”
Although there has been some pushback about the state pension age rising, it is worth remembering that when it was introduced in 1948, a 65-year-old was only expected to live a further 13.5 years, or 23 per cent, of their adult life. By 2007 this had risen to around 21 years, or 32 per cent of their adult life.
• The state pension age is rising next year
• The higher state pension age disadvantages certain areas of the country
• Poorer workers will be more disadvantaged by the rise in the SPA
Responsibility and parity
The change in the state pension age is designed to ensure “fairness” for all generations by linking it to life expectancy, so that all generations spend the same proportion of their lives over the state pension age.
According to the DWP, increasing the SPA is also “the responsible course of action”. The cost of the state pension is rising due to the ageing population, and there is a desire to manage the increase. Raising the state pension age will save £74bn by 2045 to 2046 when compared with current plans.
So raising the age at which individuals can claim the state pension is about inter-generational “fairness” and “responsibility”, but how will it affect those who are due to retire in the next 10 to 20 years?
In short, it will impact everyone. But the degree to which it will impact individuals varies for different groups of people.
The Trades Union Congress has pointed out the higher state pension age disadvantages certain areas of the country. Responding to the government announcement about a speeded-up timetable for raising the state pension age to 68, TUC general secretary Frances O’Grady says: “Hiking the state pension age risks creating second-class citizens. In large parts of the country, the state pension age will be higher than healthy life expectancy.”
Olivia Treharne, global equities fund manager at Legal & General Investment Management, says: “Life expectancy tended to be longer for the affluent: in the UK at 65, life expectancy is 23 years for men with high incomes, normal health and healthy lifestyles, but just 12 years for men with low incomes, ill health and unhealthy lifestyles.”