Early access to state pension or a state pension that varied based on socio-economic group would have negative consequences for society, John Cridland has warned.
Speaking at Aviva’s auto-enrolment pre-review, independent state pension review lead Cridland said ONS longevity predictions had been shown to have undershot actual lifespans for decades.
But he also cautioned that understanding the fundamental challenge facing dealing with an ageing society – that of the ratio of workers to retirees – had been made considerably more difficult as a result of the referendum vote to leave the European Union, as without knowing how many migrant workers would be let in, it is impossible to know what dependency ratio the UK can expect in the decades to come.
Cridland said that the current system of a fixed state pension age, applicable to all, acted as a trigger point to making people think about moving into retirement, and argued removing it could have negative consequences.
Cridland’s review is seeking industry views on a number of key issues, based around three key areas – affordability, fairness and working longer. His comments appeared to suggest he was cool on the idea of different retirement ages for different socio-economic groups, or for a monetary value approach that could be drawn earlier if needed. Submissions to his consultation are to be filed by December 31.
Cridland said: “I would not be helping ministers if we ended up allowing access to pension earlier, if that meant in 20 years time they ended up on the benefit system. And a single clear state pension age still has a tremendous utility in making people think about that trigger points in their retirement.
“Today we have 300 pensioners per thousand workers. By 2030, we are projected to have 357. But after Brexit, and what is likely to happen with migration, we haven’t the faintest idea what happens to the dependency ratio going forward.
“A girl born in Dorset this week is likely to live to 105. A boy born in Manchester is likely to live considerably less. It is a fact that people in Scotland do not live as long as those in England. So furnace is an issue. There is an 18-year variation between the longevity of different areas of London, and a 15-year difference in Manchester. There is also a big variation in the length of time people live in good health in retirement. On average half of pay half of retirement is in reasonable health, and half is in declining health. But there are big regional differences in this.
“The government wants the average person to spend about one third of their average life in retirement. So the logical consequence is that each year we live longer, we should work further eight months. There are three key questions I’m with my review, affordability, fairness, both between and within generations, and facilitating working for longer.
“Under current Treasury figures the cost of state pension will increase from 6.1 per cent of GDP today to 7.6 percent by 2044/45. These are Robert Chote of the OBR’s figures, and they already assume that state pension age will go up faster than the currently planned increases where SPA does not reach 68 until the mid 2040s. It is also worth noting that 0.5 per cent of the GDP increase in cost is the impact of the triple lock.”
