Any attempt to raise the state pension age is likely to increase unfairness and inequality, a longevity expert has warned.
The third state pension age review was discussed at Pensions UK’s annual conference in Manchester this week. Ben Franklin, deputy chief executive of the International Longevity Centre, said state spending on the state pension was “meagre” compared to other developed nations, but the £100bn-a-year cost of repaying the national debt meant the government’s hands were tied.
He said: “Stagnant productivity and the demographic pressures of an ageing population are also placing a strain on the state pension.”
Franklin pointed out that the UK population was becoming unhealthier and gave the example of an average 2.5-year dip in life expectancy for a woman in the East Midlands.
Other challenges included the 2.8 million people in the UK who were economically inactive and of working age. “We are unhealthier and working less,” Franklin said.
He explained that making the state pension more sustainable required societal changes. He said: “We need better job design and flexibility in work for those with health needs.”
Franklin added that more generosity was built into the pension systems of other European nations – notably Denmark, Sweden, and Germany.
He said the state pension system in Denmark was more flexible, automatically adjusting payments depending on life expectancy without the need for wholesale reviews.
Laurence O’Brien, senior research economist at the Institute for Fiscal Studies (IFS), outlined the IFS’s recommendations. One of them included a smoothing of the indexation of the state pension earnings link, to take account of both inflation and average salaries. He said this had been used successfully in Australia.
Suzy Morrissey, a deputy director at the Pensions Policy Institute and leader of the government review of the state pension age, told delegates the state pension would cost the UK £15.5bn a year by 2030 and that urgent solutions were needed.
She said the review would be working within the boundaries of current policy settings, but it would be focused on making sure any changes to the state pension would be sustainable and fair.
Morrissey also reminded delegates that the call for evidence was open until 24 October and that anyone who had relevant research and studies should get in touch.
