Who Is Going To Work To Pay For Your Future Pension?

Posted on Feb 05, 2024. by NTI

The International Longevity Centre (“ILC”) has published a report today (Monday 5 February) which argues the UK state pension age should be raised to the age of 71.

The ILC report, which features research on life expectancy and birthrates, blames ill health amongst the workforce makes maintain the status quo unsustainable.  Currently, the UK pension age of 66 is set to rise to 67 between May 2026 and March 2028. From 2044, it is expected to rise to 68.  This means someone born in 1960 would reach retirement age at 66, whereas someone born in 1970 would have to work an extra year.  Children of the 80s and 90s would have to work until they were 68.

Les Mayhew, associate head of global research at the International Longevity Centre and author of the report, said: “In the UK, state pension age would need to be 70 or 71 compared with 66 now, to maintain the status quo of the number of workers per state pensioner. But if you bring preventable ill health into the equation, that would have to increase even more,” Mr Mayhew knows his onions as professor of statistics at Bayes Business School and has advised the government on rises to the state pension age multiple times as a senior civil servant and in his current roles.

According to the Office for Budget Responsibility, pensioner benefits will cost the UK government £136bn in 2023-24, of which £124bn will be spent on state pensions.  So, in theory, raising the age would save Mr Hunt a fair chunk of money, but would not be welcome amongst Glaswegian men, whose average life expectancy is just under 73.

Jonathan Cribb, associate director and head of retirement at the Institute for Fiscal Studies, said that while he did not disagree with a higher pension age, increasing it without addressing other cost-saving measures was not “realistic or equitable”.  He added: “It would disproportionately impact poorer individuals whose ill-health means they have shorter lives, and so who receive pensions for less time.”

The Intergenerational Foundation, an independent thinktank, agreed that the pension age had to rise, but their analysis contains some startling numbers which they think call into debate who should shoulder the burden.  In 2010, those under 40 held £7.53 of every £100 of wealth but ten years later that had fallen to £3.98.  Their data suggested up to one-third of the UK’s 14 million Gen-Xers are at a high risk of retiring on insufficient income.

Angus Hanton, co-founder of the thinktank, said pension age should be based on life expectancy and occupation.  Nice try, Mr H, let’s make the system even more complicated!

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