The head of John Cridland's state pension age review team has warned that in 20 years' time all income deciles will "depend heavily" on the state pension for their retirement income.
Sofia Stayte, head of the Independent State Pension Age Review, said the phasing out of defined benefit schemes, the rocketing cost of housing, and low levels of private savings meant even today's high earners would lean on the state for the majority of their income in old age.
This, she said, would force a shift in expectations of what retirement means.
Speaking yesterday (1 February) at the Trades Union Congress's annual pensions conference, Ms Stayte said: "One of the most concerning issues ... is that when we look at analysis 20 years in the future, most people on all income deciles will depend heavily on the state pension because they will not have much private wealth."
This, she said, meant people would not be able to retire before the state pension age, as they often can today.
Even high earners are likely to get the majority of their income in retirement from the state pension. Sofia Stayte"We tend to think about the experience we have had or our parents have had, because this is what we can relate to, but the world in the future looks very different. And even high earners are likely to get the majority of their income in retirement from the state pension."
Ms Stayte pointed out that currently very few people are working up to the current state pension age of 65.
She said men in their early 50s today were more than 10 per cent less likely to be in work than they were in the 1970s.
She juxtaposed this trend with the fact that, with the state pension age already due to rise to 68, people would have to work longer, particularly if they did not have sufficient private savings.
Ms Stayte appeared to dampen expectations the Cridland Review would recommend introducing a flexible retirement age for those who could not work till age 68.
“We are looking at the universality of one system that is clear, that has a clear point in the future for everyone so people can plan for their retirement outcomes, versus a more personalised, sensitive system that can take into account peoples personal circumstances," she said.
"We have asked the question what should these circumstances be, and how should they be adjusted, and at which point in your life you need to look at to assess whether you will be qualified for it or not. Is it your younger years, or is it your later years?”
She said it was “very complicated”.
She pointed out that, with everyone likely to be dependent on the state pension, an option to access the state pension early could be oversubscribed.
Ms Stayte's focus on intergenerational differences contrasted with a paper released by the TUC to coincide with its conference.
The paper, entitle "Talkin’ ‘bout my generation", argued that current concerns about "intergenerational fairness" were misplaced.
While the paper accepted that younger generations were often unable to afford to save for a pension, it argued that better pay, rather than blaming baby boomers, was the solution.
TUC assistant general secretary Paul Nowak said: "Many young workers are unable to save for a pension because they’re stuck in low-paid, insecure work.
“But we are not going to fix this problem by pitting them against older people. Let’s not forget that 1.5 million pensioners live in poverty – and most of them are women.
“All generations deserve fair pay during their working lives and a decent standard of living in retirement. We must focus on the wider causes of inequality to improve pensions across the board,” he said.
The Cridland Review interim report was released in October last year. The final report is due later this year.
james.fernyhough@ft.com
