Flexible pension age would be ‘horrendously complicated’

Flexible pension age would be ‘horrendously complicated’

Introducing a flexible state pension age would be “horrendously complicated”, John Cridland has said.

Mr Cridland, who is currently conducting a government-commissioned independent review into the state pension, said variations in longevity make it extremely difficult to make fair provisions for a flexible state pension age.

Speaking at an event on auto-enrolment hosted by Aviva on Tuesday (15 November) Mr Cridland accepted that class, occupational and intergenerational factors affected longevity, and often these resulted in regional variations in longevity.

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However, he said varying state pension ages depending on region or occupation would be too blunt a tool.

“The inter-generational fairness issues are very important, the fact that people in Scotland don’t live as long as people in England; the fact that apprentices work longer than graduates; the fact that life expectancy in Manchester is two and a half years lower than life expectancy in London,” he said.

“But actually, if you try to design a state pension and state pension age to cope with those variations, you would basically have a separate state pension age and separate state pension for every pensioner, because the variations are between streets and neighbours in streets.”

He said allowing pensioners to choose to access their state pension early at a reduced rate would introduce funding problems for Treasury, particularly after the introduction of pension freedoms. 

“My colleagues in the Treasury have to be assured that those options in macro terms remain affordable,” he said.

“So clearly one of the consequences of pension freedoms in defined contribution – which are increasingly also being interesting options for people in defined benefit – is that people may well access their pots early having taken the bet that they won’t need them later.”

Mr Cridland said it would be 20 years before we know whether pension freedoms been a “good piece of public policy or not”.

“I wouldn’t be helping ministers if we allowed people to early access to the state pension if in 20 years time they were depending on the benefits system.”

Mr Cridland said a flat state pension age still had “tremendous utility in providing us all with an opportunity to think about that transition” from full-time work to retirement. 

“Any alternative to single state pension age … looks horrendously complicated,” he said.

He added that he had not yet decided whether or not to recommend bringing the age at which the state pension goes up to 68 forward.

His final report his due out in March. Submissions to his interim report close on 31 December.