Speaking during the Autumn Statement in December 2013, the Chancellor of the Exchequer, George Osborne MP, confirmed plans which would mean that people should spend a third of their adult lives in retirement.
The 2013 Draft Pensions Bill, currently going through the House of Lords, proposes five-year reviews of the State Pension Age (SPA) with the aim of maintaining the proportion of adult life spent in receipt of a state pension based on increasing life expectancy.
In the UK, reductions in mortality have been accompanied by increased life expectancies over the last century. Between 1911 to 2010, life expectancy in the UK has increased from 49.4 to 78.5 for men and from 53.1 to 82.4 for women. The Chancellor confirmed that the date when the state pension age rises to 68 will be brought forward to the mid-2030s - it had not been due to kick in until 2046 - and the state pension age could rise to 69 by the late 2040s.
A growing number of countries are beginning to link pension age with increases in life expectancy to address the financial impact of an ageing population. Across the OECD, countries are raising retirement ages as life expectancy increases. By 2050, the average state pension age will rise from 63 for men and 62 for women to almost 65 for both sexes. A number of countries in the European Union have linked pension benefits with life expectancy including Spain, Italy, Czech Republic, Denmark, Greece and the Netherlands.
It has been estimated that, from 2007 to 2032, the public expenditure on pensions and related benefits will rise from 4.7% of Gross Domestic Product (GDP) to 6.2%.
But whilst increasing the State Pension Age appears to be a logical step to addressing the financial challenges of an ageing population, the complex interplay of factors impacting on retirement and workforce participation cannot be ignored.
Our event considered some of these challenges such as:
How can increasing the State Pension Age be fair when significant numbers of poorer citizens will reach this age in ill-health (or not at all)?
Which groups lose out most by an increase in state pension age?
How can we respond to the fairness challenge?
The appropriateness of different measures of life expectancy (cohort life expectancy; period life expectancy; healthy life expectancy; disability free life expectancy).
Will increasing the State Pension Age reduce the dependency ratio and extend working lives?
What will be the fiscal impact if an increasing number older people find themselves unable to work and needing to access working age benefits?
At the event, we heared from the Minister for Pensions, Steve Webb MP; ILC-UK Research Fellow, Ben Franklin; Dr Craig Berry, ILC-UK Fellow and Research Fellow at the University of Sheffield; Camilla Williamson, Age UK’s Development and Support Manager, Knowledge Transfer; Professor John MacInnes, a social demographer and Professor of Sociology at the University of Edinburgh.
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10Feb14 - Linking SPA to Longevity - ILC-UK
1. Linking state pension age to
longevity: Tackling the fairness
challenge
Monday 10th February 2014
This event is kindly supported by Age UK
#SPAlongevity
4. Linking State Pension Age to Longevity
The Challenge of Fairness
Ben Franklin, International Longevity Centre – UK
@ilcuk
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
5. What I’m going to cover
Demographic changes and the need for working beyond 65.
Health and informal caring as a barrier.
Inequalities in healthy life expectancy across England.
Continued uncertainty over future state pension age.
Raising SPA: just one part of the solution.
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
6. The need for longer working lives…let’s start with a simple example
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
7. The need for longer working lives…
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
8. The need for longer working lives…
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
9. The need for longer working lives…
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
10. But…we have a problem
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
11. State pension age is not the only barrier…health
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
12. And informal caring can also result in people leaving the
workforce…
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
13. There has been a consistent gap between life
expectancy and healthy life expectancy
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
14. And there are sharp inequalities in healthy life expectancy across
Local Authorities…
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
15. Inequalities…closer to home
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
16. And finally…uprating SPA raises prospect of a constantly moving
target
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
17. Many thanks
Ben Franklin
Research Fellow
International Longevity Centre - UK
benfranklin@ilcuk.org.uk
02073400440
Twitter: @ilcuk
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
18. Steve Webb MP
Minister of State
Department for Work and Pensions
This event is kindly supported by Age UK
#SPAlongevity
20. Professor John MacInnes
Social Demographer and Professor of Sociology
University of Edinburgh
This event is kindly supported by Age UK
#SPAlongevity
21. Population ageing and pension
provision
John MacInnes and Jeroen Spijker
University of Edinburgh
24. Results
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
% of population in age groups with RLE≤15yrs
OADR adjusted for pension age
Ratio * 100
%
OADRs, prop. of the population at ages with RLE of ≤ 15 years and
the Real Elderly Dependency Ratio. England and Wales 1950-2050.
OADR
REDR (RLE≤15yrs/employed)
Source: Spijker, J. and J. MacInnes. Population ageing: the time-bomb that isn’t? British Medical Journal 2013;347:f6598
26. Background
The 65+ nowadays is the main force behind improving survival.
Change in life expectancy (in years) in England and Wales between each decade
Source: Spijker, J. and J. MacInnes. Population ageing: the time-bomb that isn’t? British Medical Journal 2013;347:f6598
27. Background
Years Remaining life expectancy
lived
Men
Women
Year
Statutory retirement age
Men
Women
1841-45
65
11.0
11.7
1881-85
65
10.6
11.6
1921-25
65
11.3
12.9
70
70
1961-65
65
12.0
15.5
65
60
2001-05
65
16.4
19.4
65
60
2011-15
65
18.9
21.4
65
60
2041-45
65
22.1
24.5
67
67
No pension support.
Introduced in 1909
Q Have people in the three groups aged at the same rate if their
remaining life expectancies are so different?
29. The impact of changes to the SPA on people in
routine occupations and their thoughts and
feelings on linking it to ALE
Camilla Williamson
Programme Manager – Knowledge Transfer, Age UK
30. Overview the research and why I undertook it
• Research explored the impact of changes to the SPA on people in
routine occupations and their thoughts and feelings on linking it to
ALE
• Pensions Bill 2011 and Age UK SPA campaign
• Lack of qualitative data on people’s thoughts and feelings around
SPA changes and linking SPA to ALE
• Need for the voices of those likely to be most affected by change to
be included in the policy making process
31. Data collection
•
Qualitative study carried out
•
Eight individuals in routine occupations, aged between 50 and SPA, and living
in South West London, participated in one hour, face-to-face, semi-structured
interviews.
• Participants:
Name
Mike
Pete
Steve
George
Kate
Crystal
Devna
Julie
Age
50
52
57
53
58
53
53
52
Occupation
Security Guard
Self-Employed Carpenter
Sales Assistant
Customer Service Assistant
Sales Adviser
Sales Manager
Cleaner and Shop Assistant
Clerical Assistant
32. Kate, 58, Sales Adviser
•
State Pension “only source of income” in retirement. “I’ve never been able to put
anything aside or…put into any sort of savings pot, looking forward to
retirement”
•
“Ok so you started work at 15 and 3 months then you will retire at 60 and be
given x, if you pay your dues, which I have done. And suddenly it all changes”
•
“If it was a company telling me that, you’d have redress”.
•
“My choice has been taken from me. My choice has gone. Stripped of my
choice. And…basically lied to. I guess”.
•
“As I’m getting older…I’m tiring, I do have arthritis, I do – I am struggling now”
•
“Is it right and proper to ask someone with a much more physically demanding
job to carry on doing that? With no option”
33. Pete, 52, Self-Employed Carpenter
•
“On the building site, the job would be too heavy for me, it’d be too much […]
I’ve already had trouble with my back and stuff like that”
•
“I might end up, you know, stacking shelves or something at B&Q or
something, just a part-time job or something. But not the work I’m doing
now”. “It’d be too dangerous”
•
“[Raising the SPA] just takes away your dreams really, what you’ve worked
for all these years”
•
“People have paid in and they’re entitled to when they’ve got it, see. That
should be part of the equation really, that should be it. If you start work at 20
now and you’re working until 65, isn’t that enough years of paying in that you
should be able to then claim something? […] That’s like anything else you
do. If you’ve paid into something for that long, obviously, you’d expect
something out of it, wouldn’t you?”
34. George, 53, Customer Service Assistant
• “My job is very mundane, very boring, very routine”. “For me to work…in the
same job would be soul destroying. Now, if I was working in my previous job
that I was made redundant from, I’d be very happy, or in like a similar job”
• “I applied for at least 1’000 jobs which I never, you know…I got very few
replies, very few responses”
• “I’ve tried getting to the management – erm...management scheme, you know,
to train as a manager but I didn’t get anywhere. I think I’m the wrong age”.
• “Because there’s no prospects with this organisation and it’s hard work, it’s
really having a knock-on effect on my motivation and wellbeing cos I’m going
nowhere…”
35. Julie, 52, Clerical Assistant
•
“I just started to think that I’m never going to be able to [retire]…I feel like I’m
going to have to work till I die, I think”. “[I feel] erm, [slowly]..devastated. You
know, erm…trapped basically. And a bit scared”
•
“There’s lots of people my age and they’re still working, so the jobs that they do
must not be, umm…they can’t be like ours, I don’t think”
•
“A lot of people who work in our environment, they either have strokes or, umm,
heart attacks when they retire and die. They don’t even get a lot of their pension.
So I think that [SPA] should be based on your working environment, you know,
rather than the general”
•
“You’ve got all this data, you know, so why do you compile all this data about
people…if you’re just going to use a basic average all of the time?”
•
“You’ve got to break it down a lot more before you can start deciding that you’re
going to take loads of money and time away from this person because you’ve
fixed them to this bracket”.
36. Closing remarks
•
Strength of feeling about SPA changes
•
Significant impact of changes on this group, particularly in regard to:
their ability to continue working, feeling trapped and stripped of choice, and
the effect of changes on their aspirations for retirement
•
Participants’ shock at the idea of linking ALE more directly with SPA
•
Feeling that the average does not reflect differences in people’s
circumstances, particularly in terms of health, employment and contributions
•
The importance of including the voices and experiences of those who are
most affected by changes in the policy making process
•
The role of qualitative research
38. Dr Craig Berry
Research Fellow
University of Sheffield
This event is kindly supported by Age UK
#SPAlongevity
39. STATE PENSION AGE AND
LIFE EXPECTANCY INEQUALITIES
Craig Berry
Sheffield Political Economy Research Institute
University of Sheffield
40. Life expectancy inequalities
Issue neglected by policy-makers
Issue neglected by statisticians
The evidence we have is overwhelming
Not neglected by pensions industry
Huge evidence gap re disaggregated
projections
41. Life expectancy at 65 by gender (years)
Men
Women
Gap
Gap change
from 2011
2011
18.2
20.8
2.6
-
2016
19.6
21.9
2.3
-0.3
2028
21.5
23.9
2.4
-0.2
England and Wales only.
Based on latest available ONS data: 2009/11 interim life tables and 2010based period and cohort life expectancy tables.
See http://www.tuc.org.uk/sites/default/files/tucfiles/State%20Pension%20Age.pdf
42. Male life expectancy at 65 by class (years)
Routine &
manual
2006
2016
2028
Managerial &
professional
Gap
Gap change from
2006
15.8
17.4
18.4
20.2
2.6
2.8
+0.2
19.3
22.4
3.1
+0.5
Female life expectancy at 65 by class (years)
Routine &
manual
Managerial &
professional
Gap
Gap change from
2006
2006
2016
18.9
19.8
21.3
22.8
2.4
3.0
+0.6
2028
20.8
24.6
3.8
+1.4
England and Wales only.
2006 results based on latest available ONS data: 2002/06 life expectancy by NS-SEC class. 2016 and 2028 results are
TUC estimates based on average annual increase for NS-SEC group 1992/96-2002/06, adjusted by expected change in
average annual increase for all England and Wales population between 1996-2006 and 2006-2028 (derived from ONS
2010-based period and cohort life expectancy tables).
See http://www.tuc.org.uk/sites/default/files/tucfiles/State%20Pension%20Age.pdf
43. Male life expectancy at 65 by geography (years)
2011
2028
2028 Gap to East Dorset
(change from 2011)
Manchester
15.4
16.9
7.1 (+1.6)
Corby
16.5
18.2
5.8 (+1.4)
M’brough
16.5
18.4
5.6 (+1.2)
Female life expectancy at 65 by geography (years)
2011
2028
2028 Gap to East Dorset
(change from 2011)
Manchester
18.8
20.3
7.7 (+2.9)
Corby
18.6
19.1
9 (+4.9)
M’brough
19
20.7
7.4 (+2.7)
2011 results based on latest available ONS data: 2009/11 life expectancy by local area. 2016 and 2028 results are TUC
estimates based on average annual increase for each local 2000/02-2009/11, adjusted by expected change in average
annual increase for all England population between 2002-2011 and 2011-2028 (derived from ONS 2010-based period and
cohort life expectancy tables).
Adapted from http://www.tuc.org.uk/sites/default/files/tucfiles/State%20Pension%20Age.pdf
44. Impact on SP outcomes
Across all groups, inequality in lifetime
receipt of state pension will increase
By 2028, women receive 12.3% more than
men
White-collar men receive 17.6% more than
blue-collar, 20.4% for women
East Dorset pensioners receive around 50%
more than Manchester men and Corby
women
See http://www.tuc.org.uk/sites/default/files/tucfiles/State%20Pension%20Age.pdf
45. State pension age
Pensions Bill confirms SPA rise to 67 by 2028,
but based on 2010 average life expectancy
tables that have already been revised down
Raising SPA based on average life expectancy
exacerbates enormous inequality
Autumn statement 2013 seems to contradict
Pensions Bill; if nothing else, it pre-empts
‘independent’ review and even GAD’s
formulaic approach
46. SPA compared
OECD average SPA in 2050 will be 65.6, UK
will by 68 in mid-2030s
Only Ireland has accelerated SPA as quickly
UK is more unequal than most other
European countries
SPA needs to rise but why so quickly – does
the govt believe in its own economic
strategy?
47. Independent commission
Need a lot more data, especially on socio-
economic group and/or income distribution
Guided by average life expectancy but also
life expectancy of lowest income decile
Must consider evidence on working in later
life (conventional wisdom is wrong, skewed
by lower female SPA)
Employee and employer representatives
Less frequent than every parliament
48. Linking state pension age to
longevity: Tackling the fairness
challenge
Monday 10th February 2014
This event is kindly supported by Age UK
#SPAlongevity
