A State Pension At Age 70: A Real Possibility For Today's Young People

At what age State Pension should be set is a constant topic of discussion for consecutive governments.  The State Pension Age (SPA) for those retiring between now and 2028 are already laid down, and it appears the government is not planning further changes during that period.   SPA is 65 for men and 64 for women rising every few months and equalising at 65 for both men and women in 2018.    By 2020 SPA will be 66; it climbs to 67 through a series of gradual increases with those born in 1961 and beyond being the first to collect their pension at 67. The next increase are for those born in 1977,  and with further increases  everyone born after 6th April 1978 will collect state pension from age 68 [1].  

In the last few months there have been discussions on increasing the SPA.  The speed at which SPA is to be increased, if accepted will hit those in their 20s, 30s and 40s the hardest.  Two separate reports – by the government - have raised the possibility that millions of people may have to work longer to qualify for a state pension[2].  Teenagers and those in their twenties have the distinct possibility of having to work until age 70 before they collect state pension, and those in their 30s and 40s would receive their state pension at age 69, if the recommendations in the reports are carried through.  

The John Cridland[3]  report among other things suggests bringing forward the SPA to 68 over a 2-year period starting in 2037 and ending in 2039.  At the moment state pension increases would reach 68 only by 2046.   Another of his recommendations is that of scrapping the ‘triple lock’, which protects pensioner incomes against inflation in the next Parliament.  Mr. Cridland  has instead suggested that pension rises be linked to earnings.  

Frances O’Grady, General Secretary of the Trade Union Congress (TUC) said “hiking the state pension age will hit low paid workers the hardest, and it will punish those who become too sick to work”… ending the triple lock while driving up state pension age would be a stealth cut to the future incomes of workers who are today in their 30s and 40s[4]   the worst placed of the generations in terms of workplace savings.  They are also the least likely to be able to work into later life or have the savings to be able to cushion retirement ahead of state pension. 

Of course there are vast inequalities in health and wealth which is acknowledged in the Cridland report.  Recommendations are offered as to how such issues can be addressed, putting in place additional means tested support or offering flexibility through part time work for  those who may be a few years off from retirement but ill-health or a disablement makes them economically inactive;  measures to help the substantial number of economically inactive between the ages of  60-64 or those who may be in a mid-life career review (to give people an option to review, take stock of their skills, knowledge and experience).   However, many of these recommendations have yet to be tested and the recommendations in themselves may not be enough as people face challenges on a daily basis that cannot be neatly fitted into boxes. 

Working until the age of 70 before being able to collect the state pension is not a lifestyle choice, much in the same way as the modern working life of zero-hour contract, agency working, precarious working and part time work young people are having to do in order to survive.  

At the time of writing, the government is considering the recommendations contained in the reviews.  Let’s hope common sense prevails and the outcome is one that is in the best interest of our society especially our young workers. 

 

Compiled by:

CWU Research Department

 

[1] “State Pension Age: Look up when you will retire”, The Telegraph, 23rd March 2017 access via http://www.telegraph.co.uk/pensions-retirement/financial-planning/state-pension-age-look-up-when-you-will-retire/

[2] “Periodic review of rules abut State Pension age Report by the Government Actuary, Government Actuary’s Department”, HC989 24th March 2017 access via https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/603136/periodic-review-of-rules-about-state-pension-age-gad-report.pdf and “Independent Review of the State Pension Age, Smoothing the Transition”, Final Report, March 2017 access via https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/602145/independent-review-of-the-state-pension-age-smoothing-the-transition.pdf

[3] “Independent Review of the State Pension Age, Smoothing the Transition”, Final Report, March 2017 access via https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/602145/independent-review-of-the-state-pension-age-smoothing-the-transition.pdf

[4] “TUC slams ‘stealth cuts’ to  state pension in mooted age hike for under-40s”,  Left Foot Forward, access via https://leftfootforward.org/2017/03/tuc-slams-stealth-cuts-to-state-pension-in-mooted-age-hike-for-under-40s/