Why you could be waiting till your 70s for a state pension

The International Monetary Fund has suggested that the state pension age in the UK might have to rise further, prompting a minor media flurry.

With the same subtle thinking that led it to promote excessive privatisation, deregulation, and trade liberalisation on several continents, the IMF believes hiking state pension age is a key answer to rising life expectancy.

The IMF does at least acknowledge that other policies may also be needed because state pension age increases “may disproportionately affect groups with lower-than-average life expectancy”.

It’s also interesting that the IMF’s own Staff Retirement Plan has a normal retirement age of 62 (although staff can take benefits from 55).

Could it be that the very institution that thinks withholding benefits is the best tool for encouraging people to postpone retirement takes a different approach to its own staff?

The UK state pension age for both men and women will rise to 66 by October 2020 and increase again to 67 between 2026 and 2028.

The government has also announced a further increase to 68 between 2037 and 2039, although it hasn’t yet attempted to get Parliament to agree to this.

But there are very good reasons to be wary about further hikes to state pension age.

The first is that we can no longer assume that life expectancy will continue to rise at the same pace.

Improvements over the last century have been driven by childhood immunisations, universal health care, medical advances (such as in treatment of heart disease and cancer) and lifestyle changes, including a decline in smoking.

But there has been a sharp slowdown in the rate of improvement in recent years. Whether this is down to the impact of cuts to public services, medical and lifestyle changes reaching a natural limit, or a mere statistical quirk has yet to be established. But it is enough to suggest caution.

Secondly, the improvements in life expectancy have not been equally distributed, with the wealthiest experiencing the greatest increase.

And there are stark divides between North and South and between postcodes in local areas.

So a 65 year-old man in Harrow is now likely to live an additional 20.9 years – six years more than his equivalent in Glasgow City.

Thirdly, increased longevity does not directly translate into continued ability to work. Healthy life expectancy has also increased, but not at the same rate as life expectancy. This means more years spent in poor health.

So while an English male could expect to live 79.5 years in 2014–16, his average healthy life expectancy was only 63.3 years – below the current state pension age of 65. This means 16.2 of those years (20 per cent) would be spent in poor health.

There is strong evidence that many people struggle to stay in the labour market past their 50s or early 60s regardless of what state pension age is, and that this is often due to ill health.

The result is pension age rises hit the poorest the hardest, which is exactly what happened after the state pension age for women was raised to match that of men.

This doesn’t mean we shouldn’t help those who want to continue working in their later years to do so, whether that be in their 50s or their 70s.

There is evidence that working into old age can be positive for individuals and the economy, but this will require changes to the workplace.

That’s why the TUC wants all jobs to be flexible by default in order to accommodate the needs and choices of the worker.

We also want mid-life career reviews to become effective vehicles for ensuring older workers receive the support to continue their careers, and a right for older workers to retrain.

We need to make the workplace hospitable to older workers, not force people to stay in work by making retirement financially impossible.