During most of the 2010s, the question around the UK state pension age wasn’t whether it would need to rise but how dramatic that increase would have to be to put it on a sustainable footing.
With the baby boomer generation approaching retirement and life expectancy rising seemingly inexorably, failure to cut state pension spending risked forcing the government to either raise taxes elsewhere or make swingeing cuts to public services – or both.
State pension age increases would clearly never be popular, but there was near-universal agreement they would be necessary. Men’s and women’s state pension ages were controversially equalised at age 65 in the late 2010s, before a rapid increase to age 66 was implemented between 2018 and 2020. Current legislation will see the state pension age rise to age 67 by 2028 and age 68 by 2046.
Life expectancy at age 65, roughly state pension age, is 18.3 years for men and 20.8 years for women
Various experts and politicians have pushed for these increases to be accelerated to reflect long-term improvements in life expectancy. It’s worth remembering the increase in the state pension age to 66 was the first since the modern system was created just after the Second World War, when life expectancy was in the mid-60s.
According to the latest data from the Office for National Statistics (ONS), life expectancy at age 65, roughly state pension age, is 18.3 years for men and 20.8 years for women.
Some have argued the state pension age needs to increase quickly to 70, or even beyond, in order to account for these longevity improvements. As recently as last year, the government was rumoured to be considering bringing forward the increase in the state pension age to 68 to the mid-2030s.
It is striking that life expectancy at birth is now back to the same level as 2010-2012 for women and slightly below the 2010-2012 level for men
However, even before the pandemic, life-expectancy improvements across the UK had ground to a halt, and in some areas had started to go backwards. The latest data from the ONS, covering the period 2020-22, shows life expectancy for both men and women has fallen.
This is undoubtedly largely as a result of Covid-19, but it is striking that life expectancy at birth is now back to the same level as 2010-2012 for women and slightly below the 2010-2012 level for men. This could have profound implications for state pension policy.
An election year…
I would not expect the Conservatives or Labour to go into a general election pledging to increase the state pension age faster. Telling the electorate they might get their state pension later would have been a tough sell when life expectancy was rising – it is even tougher when life expectancy is going backwards.
Allowing earlier access to the state pension, potentially at a reduced rate, would allow those who may have limited life expectancy to access some of their state benefit sooner
There also remains the very real challenge of inequality. Official data suggests men living in the most deprived areas of the country live almost 10 years less than men living in the most prosperous areas. For women, the difference is almost eight years – and both sexes have experienced ‘significant increases’ in the inequality of life expectancy at birth since 2015-17. The gaps in healthy life expectancy are even more staggering, standing at around 19 years for both men and women.
There are ways this could be addressed, but each comes with significant challenges. Means-testing could make the system fairer but add unwelcome complexity, not to mention administrative cost.
Allowing earlier access to the state pension, potentially at a reduced rate, would at least allow those who may have limited life expectancy to access some of their state benefit sooner.
The next government may need to initiate another review to figure out a way forward for the state pension
Another idea that has been floated would see people entitled to access the full state pension after reaching a certain number of years’ National Insurance contributions. The thinking here is that those more likely to start work when they are young are, on balance, more likely to have manual jobs they may struggle continue with when they are older.
Some of these ideas have merit, but none are perfect and each would make messaging around the state pension more complicated. They also entail a major overhaul of the state pension system, which would inevitably be controversial.
The next government may need to initiate another review to figure out a way forward for the state pension, considering both the age at which the benefit is received and the amount Brits are entitled to. But falling life expectancy means one assumed truth – that the state pension age would have to keep rising – is now open to challenge.
Tom Selby is director of public policy at AJ Bell
Sorry Tom … and there is no easy way of putting this … you are wrong … wrong and … wrong again :-
“Life expectancy at age 65, roughly state pension age, is 18.3 years for men and 20.8 years for women”.
– Fact – this was not an increase in life expectancy – it was virtually identical to life expectancy in the 1970s 1980s and 1990s – ONS figures have consistently confirmed this to be the case (I have read and studied them)- it is only politicians, who were looking for a way of reducing the “baby boomer” effect on State pension costs – this, after increasing NIS payments massively in the 1970s and 1980s to include the extra state pension called SERPS, which they (both political parties) then spent those increased taxation revenues on something else – notably electioneering their own return to government.
They have now abolished the SERPS benefit but retained the increased NIS payments – Nice!
“It’s worth remembering the increase in the state pension age to 66 was the first since the modern system was created just after the Second World War, when life expectancy was in the mid-60s”.
Wrong – Of course life expectancy just after the Second World War was only in the mid 60s – but this was only if you averaged back and included the huge number of deaths in the 1939/45 Second World War. If you strip those “artificial deaths” out of the equation, then life expectancy in the 1960s was only very slightly less than those of today.
The ONS statistics on life expectancy is always a complex read, but politicians use of it is purely and simply, just an excuse to justify depleting the state pension benefit.
Politicians use the ONS stats totally falsely, in this way, either because they don’t understand them, or more probably because they have never read them. In either event they are a disgrace to their profession or they are utterly incompetent …
As a professional in your own role, Tom, I would recommend that you should be careful not fall into the same trap – read the statistics for yourself, and analyse them carefully.
Good Analysis seems to be the key