The prosperous countryside of east Dorset is home to Britain’s longest living residents, with the average male at birth expected to survive 82.9 years. Maybe it won’t make too much difference to their financial futures that the government said this week that it would raise the state pension age to 68 sooner than planned. They will still be collecting their state pension for nearly 15 years after retiring, picking up around £124,000 assuming the new state pension stays at £159.95 a week. They are certainly getting good value from their national insurance payments when they were working. Along the way they will also enjoy a £3,000 winter fuel bonus and once they reach 75, as they nearly all will, the TV licence is free, saving £147 a year.
Now compare that with the deal for someone born in Glasgow. It has Britain’s worst longevity figures, with the average male expected to live just 72.6 years. The new retirement age of 68 means our typical Glaswegian male will pick up a state pension for only four to five years, pocketing just £38,000 in total. That winter fuel payment, more needed in Glasgow than Dorset, will be more like £800, while on average they cannot expect to ever get the free TV licence.
This is a simplistic comparison and can be unpicked in lots of ways, not least that the data is skewed by the well-off departing Glasgow for retirement elsewhere, with a rump of unhealthy manual workers left behind. But it shows just how blunt our “one size fits all” state pension system has become.
As the state pension age creeps up and up, with experts saying further rises to 70 are inevitable, workers with poorer longevity prospects – those in manual trades in particular – may legitimately ask why they are expected to pay loads of NI when their prospects for much of a payout are rather limited.
The early shift to a state pension age of 68 is also another fracture in the social contract across the generations. The triple lock for today’s pensioners is inviolable. The vast final salary-based payouts of better-off public sector workers are untouchable. Yet for the young, nothing seems to be off limits. They are expected to take on large debts for their education. Young women in particular will be expected to work eight years longer than their mothers before qualifying for a state pension. They won’t have generous guaranteed final salary pension schemes, but flimsy stock market-based alternatives instead. And you can bet your NI payments that when it comes to their retirement that triple lock will be long gone.
The government, under cover of the Cridland report, is also raising the state pension age at the very moment other reports suggest increases in longevity have stalled due to miserly health and social care spending. And that’s before the epidemic of obesity and diabetes starts to take its inevitable toll.
There is no alternative, insists the government. But there is. Other countries arrange their pensions differently. The French levy hefty social charges on employers, enabling them to pay much higher pensions and earlier than us. The average French person enjoys a retirement that lasts three to five years longer than the average Brit. Across Europe the state pension age is creeping up, but from 65 to 67. In Britain we are fast-tracking towards 68.
There are ways to slow down the shift to high state pension ages without placing yet more burdens on the young. The most under-taxed store of wealth in the UK is property, largely owned by an older generation. There are myriad ways to access it – capital gains tax, inheritance tax or even land value tax. We could also oblige the better-off retired to pay at least a half-rate of NI.
There are calls to regionalise the state pension age – pay it earlier, say, in Blackpool than in Bournemouth. But how this could work in practice is an unsolved question.