Allowing people with more than 45 years of National Insurance (NI) contributions to receive their full state pension early could enable up to a quarter of a million people to enjoy a much-needed retirement after decades of physically demanding, manual work, according to a new paper by the Pensions Policy Institute (PPI), sponsored by Age UK.
Increases in average life expectancy have led to a rise in the State Pension Age (SPA) in recent years – it’s currently on course to reach 67 by 2028 for both men and women. But while most people will live to 67 and beyond, there are many – particularly men in more deprived areas and lower social classes – who are unlikely to make it to State Pension Age in good health. In Glasgow City, for example, additional figures show that healthy life expectancy at birth is just 55.9 years for men and 58.5 years for women – nearly 10 years below the current State Pension Age.
The evidence shows that it is those in manual work or with caring responsibilities who are most likely to be hard hit by State Pension Age increases. That’s why Age UK is urging the government to fully consider the impact of extending working lives on the most disadvantaged and vulnerable groups before making further changes. With healthy life expectancies varying greatly across the UK, and inequalities widening between deprived and affluent areas, the Charity is arguing that further increases to the State Pension Age must not be based on life expectancy alone.
The joint briefing paper examines the implications of four potential policies which could mitigate the effects of rising SPA on vulnerable people.
OPTION 1: Allowing people with more than 45 years of contributions to receive their state pension early unreduced. These people are more likely to be in manual occupations, having started working straight after school, which may mean they are less able to continue working up to a higher SPA. This option is already happening in Germany so there is an international precedent.
OPTION 2: Delinking Pension Credit (PC) and SPA so that, for example, the age at which people receive PC remains at 65.Eligible people are likely to be those on low incomes who are not in work as they approach SPA because they are unable to continue working or are unable to find work.
OPTION 3: Allowing early access to reduced state pension to allow for the fact that the pension will be paid for a longer time.This could provide a source of income for people who are happy to accept a lower state pension in return for early payment and an earlier retirement. Many countries, including the USA and Canada, already allow some early access to their state pension system.
OPTION 4: Allowing unreduced early access to particular individuals, for example those with disabilities and/ or caring responsibilities. This would help some groups of people who are unable to work longer because of their life circumstances.
Age UK’s Charity Director, Caroline Abrahams, said: “We already know that increasing the State Pension Age based on average life expectancy will cause hardship for many people.
“It is, of course, reasonable to consider raising the State Pension Age as overall life expectancy goes up – but as a blanket approach, it risks leaving many people facing serious problems in later life through no fault of their own. In fact as the State Pension Age climbs ever higher, many of those with lower life expectancies – who are also likely to be on lower incomes – may end up with little or no time left in retirement to enjoy.
“We would urge the government to consider all the options before making further changes to the State Pension Age. Increasing the State Pension Age for everyone, regardless of caring responsibilities or health and employment opportunities, seems unfair and penalises thousands of people at a time in their lives when they most need support. As this research shows there are a number of ways to help the many thousands of people who are, for whatever reason, unable to work into their late sixties.”
John Adams, the PPI’s Senior Policy Analyst and author of the briefing paper, said: “With increasing life expectancies in the UK it is understandable that the Government might wish to increase State Pension Age, but care should be taken to recognise the impact on people who may be unable to continue in work, for example, as a result of health issues or caring responsibilities.”
Age UK offers a free advice service for older people who are affected by any of these issues. People can call Age UK Advice free of charge on 0800 169 6565, visit www.ageuk.org.uk or contact their local Age UK for further information.