MPs have warned that increasing the state pension age may mean working people could die before they become eligible to receive it.
The report on intergenerational fairness was published by the Commons work and pensions select committee and states that the state pension age will need to be increased to 70.5 years in order to finance the triple lock guarantee on pensions. Based on average life expectancy, increasing the age will mean men in Manchester, Birmingham, Bradford and Blackpool will die before they qualify for their state pension.
Pensions have grown each year since 2010 under the triple lock, either by the rate of inflation, average earnings or 2.5% minimum; whichever is the higher figure. Although the guarantee has meant many pensioners have been spared from poverty, the committee stated that it had meant those over 65 had been taking an “ever greater share of national income”.
They advised in their November 2016 report that the triple lock should be replaced by a smoothed earnings link from 2020. By setting the state pension to a fixed proportion of average earnings, purchasing power during periods of inflation is safeguarded.
The committee highlighted figures from the Institute of Fiscal Studies. These indicated that in order to make the triple lock affordable, the age of state pension would need to increase to 70.5 years by 2060. They stated that this would result in “today’s young [facing] working lives of over 50 years before receiving a state pension”.
“Making the triple lock sustainable would mean pushing the state pension age over average life expectancy in poorer areas of the UK”.
At 67.5, Blackpool is the area with the lowest male life expectancy, whilst in Bradford, it rises to 68.7, and further to 70.2 in parts of Manchester.
Commenting on the impact of raising the state pension age was the MP who chairs the committee, Frank Field, who stated: “With the triple lock in place, the only way state pension expenditure can be made sustainable is to keep raising the state pension age. This has the effect of excluding ever more people from the state pension altogether. Such people will disproportionately be from more deprived areas and manual occupations, while those benefitting most will be the relatively prosperous.
“By 2020, the state pension will be at a level where it will provide a decent minimum income for people in retirement to underpin private saving and any savings they have will be kept on top of, not clawed back from, the state pension. The triple lock will have done its job and it will be time therefore to retire it.”
The abandonment of the triple lock has been consistently rejected by MPs however, a sentiment clearly conveyed in a statement from a government spokesperson:“The government wants to ensure economic security for people at every stage of their life, including retirement. The triple lock has protected the incomes of millions of pensioners and we are committed to it for the duration of this parliament.”
Following the reports’ publication, the ongoing controversy around intergenerational fairness is only likely to grow.
Recent research indicated that working households, on average, are £20 a week worse off than pensioners. The data from the Resolution Foundation revealed that financial gain from private pensions, property and benefits have caused retiree income to grow beyond that of working families for the first time.
Although this is not the case for all retirees, it will usually apply to those who are continuing to earn, own property and have an occupational pension.
