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Speaking during the Autumn Statement in December 2013, the Chancellor of the Exchequer, George Osborne MP, confirmed plans which would mean that people should spend a third of their adult lives in retirement. The 2013 Draft Pensions Bill, currently going through the House of Lords, proposes five-year reviews of the State Pension Age (SPA) with the aim of maintaining the proportion of adult life spent in receipt of a state pension based on increasing life expectancy. In the UK, reductions in mortality have been accompanied by increased life expectancies over the last century. Between 1911 to 2010, life expectancy in the UK has increased from 49.4 to 78.5 for men and from 53.1 to 82.4 for women. The Chancellor confirmed that the date when the state pension age rises to 68 will be brought forward to the mid-2030s - it had not been due to kick in until 2046 - and the state pension age could rise to 69 by the late 2040s. A growing number of countries are beginning to link pension age with increases in life expectancy to address the financial impact of an ageing population. Across the OECD, countries are raising retirement ages as life expectancy increases. By 2050, the average state pension age will rise from 63 for men and 62 for women to almost 65 for both sexes. A number of countries in the European Union have linked pension benefits with life expectancy including Spain, Italy, Czech Republic, Denmark, Greece and the Netherlands. It has been estimated that, from 2007 to 2032, the public expenditure on pensions and related benefits will rise from 4.7% of Gross Domestic Product (GDP) to 6.2%. But whilst increasing the State Pension Age appears to be a logical step to addressing the financial challenges of an ageing population, the complex interplay of factors impacting on retirement and workforce participation cannot be ignored. Our event considered some of these challenges such as: How can increasing the State Pension Age be fair when significant numbers of poorer citizens will reach this age in ill-health (or not at all)? Which groups lose out most by an increase in state pension age? How can we respond to the fairness challenge? The appropriateness of different measures of life expectancy (cohort life expectancy; period life expectancy; healthy life expectancy; disability free life expectancy). Will increasing the State Pension Age reduce the dependency ratio and extend working lives? What will be the fiscal impact if an increasing number older people find themselves unable to work and needing to access working age benefits? At the event, we heared from the Minister for Pensions, Steve Webb MP; ILC-UK Research Fellow, Ben Franklin; Dr Craig Berry, ILC-UK Fellow and Research Fellow at the University of Sheffield; Camilla Williamson, Age UK’s Development and Support Manager, Knowledge Transfer; Professor John MacInnes, a social demographer and Professor of Sociology at the University of Edinburgh.
Citation preview
Linking state pension age to longevity: Tackling the fairness
challenge
Monday 10th February 2014
This event is kindly supported by Age UK
#SPAlongevity
Welcome
Baroness Sally Greengross
Chief ExecutiveILC-UK
This event is kindly supported by Age UK
#SPAlongevity
Ben FranklinResearch Fellow
ILC-UK
This event is kindly supported by Age UK
#SPAlongevity
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
Linking State Pension Age to Longevity
The Challenge of Fairness
Ben Franklin, International Longevity Centre – UK
@ilcuk
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
What I’m going to cover
Demographic changes and the need for working beyond 65.
Health and informal caring as a barrier.
Inequalities in healthy life expectancy across England.
Continued uncertainty over future state pension age.
Raising SPA: just one part of the solution.
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
The need for longer working lives…let’s start with a simple example
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
The need for longer working lives…
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
The need for longer working lives…
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
The need for longer working lives…
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
But…we have a problem
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
State pension age is not the only barrier…health
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
And informal caring can also result in people leaving the workforce…
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
There has been a consistent gap between life expectancy and healthy life expectancy
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
And there are sharp inequalities in healthy life expectancy across Local Authorities…
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
Inequalities…closer to home
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
And finally…uprating SPA raises prospect of a constantly moving target
The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
Many thanks
Ben Franklin
Research Fellow
International Longevity Centre - UK
02073400440
Twitter: @ilcuk
Steve Webb MPMinister of State
Department for Work and Pensions
This event is kindly supported by Age UK
#SPAlongevity
Paul KitsonPartner
PwC
This event is kindly supported by Age UK
#SPAlongevity
Professor John MacInnesSocial Demographer and Professor of Sociology
University of Edinburgh
This event is kindly supported by Age UK
#SPAlongevity
Population ageing and pension provision
John MacInnes and Jeroen SpijkerUniversity of Edinburgh
The UK population is now the ‘youngest’ for 150 years in terms of years left
Flexible Ageing © John MacInnes 2013
1843 1851 1859 1867 1875 1883 1891 1899 1907 1915 1923 1931 1939 1947 1955 1963 1971 1979 1987 1995 2003 2011 2019 2027 2035 2043
-5
-3
-1
1
3
5
Pop 60/65+; RLE<15, GDP, annual % change 1841-2051
60/65+ growthpop RLE<15GDP growth
OADRs, prop. of the population at ages with RLE of ≤ 15 years and the Real Elderly Dependency Ratio. England and Wales 1950-2050.
1950 1958 1966 1974 1982 1990 1998 2006 20142022 2030 2038 20460
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
% of population in age groups with RLE≤15yrs OADROADR adjusted for pension age REDR (RLE≤15yrs/employed)
%
Rat
io *
100
Source: Spijker, J. and J. MacInnes. Population ageing: the time-bomb that isn’t? British Medical Journal 2013;347:f6598
Results
OADR and REDR 1958-2009 various countries
Flexible Ageing © John MacInnes 2013
Background The 65+ nowadays is the main force behind improving survival.
Change in life expectancy (in years) in England and Wales between each decade
Source: Spijker, J. and J. MacInnes. Population ageing: the time-bomb that isn’t? British Medical Journal 2013;347:f6598
Remaining life expectancy at age 65. Eng&Wal. 1841-2041.
YearYears lived
Remaining life expectancy Statutory retirement age
Men Women Men Women
1841-45 65 11.0 11.7 No pension support. Introduced in 19091881-85 65 10.6 11.6
1921-25 65 11.3 12.9 70 70
1961-65 65 12.0 15.5 65 60
2001-05 65 16.4 19.4 65 60
2011-15 65 18.9 21.4 65 60
2041-45 65 22.1 24.5 67 67
Q Have people in the three groups aged at the same rate if their remaining life expectancies are so different?
Background
Camilla WilliamsonProgramme Manager - Knowledge Transfer
Age UK
This event is kindly supported by Age UK
#SPAlongevity
The impact of changes to the SPA on people in routine occupations and their thoughts and feelings on linking it to ALE
Camilla Williamson
Programme Manager – Knowledge Transfer, Age UK
Overview the research and why I undertook it
• Research explored the impact of changes to the SPA on people in routine occupations and their thoughts and feelings on linking it to ALE
• Pensions Bill 2011 and Age UK SPA campaign
• Lack of qualitative data on people’s thoughts and feelings around SPA changes and linking SPA to ALE
• Need for the voices of those likely to be most affected by change to be included in the policy making process
Data collection
• Qualitative study carried out
• Eight individuals in routine occupations, aged between 50 and SPA, and living in South West London, participated in one hour, face-to-face, semi-structured interviews.
• Participants: Name Age Occupation
Mike 50 Security Guard
Pete 52 Self-Employed Carpenter
Steve 57 Sales Assistant
George 53 Customer Service Assistant Kate 58 Sales Adviser
Crystal 53 Sales Manager
Devna 53 Cleaner and Shop Assistant
Julie 52 Clerical Assistant
Kate, 58, Sales Adviser
• State Pension “only source of income” in retirement. “I’ve never been able to put anything aside or…put into any sort of savings pot, looking forward to retirement”
• “Ok so you started work at 15 and 3 months then you will retire at 60 and be given x, if you pay your dues, which I have done. And suddenly it all changes”
• “If it was a company telling me that, you’d have redress”.
• “My choice has been taken from me. My choice has gone. Stripped of my choice. And…basically lied to. I guess”.
• “As I’m getting older…I’m tiring, I do have arthritis, I do – I am struggling now”
• “Is it right and proper to ask someone with a much more physically demanding job to carry on doing that? With no option”
Pete, 52, Self-Employed Carpenter
• “On the building site, the job would be too heavy for me, it’d be too much […] I’ve already had trouble with my back and stuff like that”
• “I might end up, you know, stacking shelves or something at B&Q or something, just a part-time job or something. But not the work I’m doing now”. “It’d be too dangerous”
• “[Raising the SPA] just takes away your dreams really, what you’ve worked for all these years”
• “People have paid in and they’re entitled to when they’ve got it, see. That should be part of the equation really, that should be it. If you start work at 20 now and you’re working until 65, isn’t that enough years of paying in that you should be able to then claim something? […] That’s like anything else you do. If you’ve paid into something for that long, obviously, you’d expect something out of it, wouldn’t you?”
George, 53, Customer Service Assistant
• “My job is very mundane, very boring, very routine”. “For me to work…in the same job would be soul destroying. Now, if I was working in my previous job that I was made redundant from, I’d be very happy, or in like a similar job”
• “I applied for at least 1’000 jobs which I never, you know…I got very few replies, very few responses”
• “I’ve tried getting to the management – erm...management scheme, you know, to train as a manager but I didn’t get anywhere. I think I’m the wrong age”.
• “Because there’s no prospects with this organisation and it’s hard work, it’s really having a knock-on effect on my motivation and wellbeing cos I’m going nowhere…”
Julie, 52, Clerical Assistant
• “I just started to think that I’m never going to be able to [retire]…I feel like I’m going to have to work till I die, I think”. “[I feel] erm, [slowly]..devastated. You know, erm…trapped basically. And a bit scared”
• “There’s lots of people my age and they’re still working, so the jobs that they do must not be, umm…they can’t be like ours, I don’t think”
• “A lot of people who work in our environment, they either have strokes or, umm, heart attacks when they retire and die. They don’t even get a lot of their pension. So I think that [SPA] should be based on your working environment, you know, rather than the general”
• “You’ve got all this data, you know, so why do you compile all this data about people…if you’re just going to use a basic average all of the time?”
• “You’ve got to break it down a lot more before you can start deciding that you’re going to take loads of money and time away from this person because you’ve fixed them to this bracket”.
Closing remarks
• Strength of feeling about SPA changes
• Significant impact of changes on this group, particularly in regard to: their ability to continue working, feeling trapped and stripped of choice, and the effect of changes on their aspirations for retirement
• Participants’ shock at the idea of linking ALE more directly with SPA
• Feeling that the average does not reflect differences in people’s circumstances, particularly in terms of health, employment and contributions
• The importance of including the voices and experiences of those who are most affected by changes in the policy making process
• The role of qualitative research
Thank you
Camilla Williamson
Programme Manager – Knowledge Transfer
Dr Craig BerryResearch Fellow
University of Sheffield
This event is kindly supported by Age UK
#SPAlongevity
STATE PENSION AGE AND LIFE EXPECTANCY INEQUALITIES
Craig BerrySheffield Political Economy Research InstituteUniversity of Sheffield
Life expectancy inequalities Issue neglected by policy-makers Issue neglected by statisticians The evidence we have is
overwhelming Not neglected by pensions industry Huge evidence gap re disaggregated
projections
Life expectancy at 65 by gender
(years)
Men Women Gap Gap
change
from 2011
201
1
18.2 20.8 2.6 -
201
6
19.6 21.9 2.3 -0.3
202
8
21.5 23.9 2.4 -0.2
England and Wales only.Based on latest available ONS data: 2009/11 interim life tables and 2010-based period and cohort life expectancy tables.See http://www.tuc.org.uk/sites/default/files/tucfiles/State%20Pension%20Age.pdf
Male life expectancy at 65 by class (years)
Routine & manual
Managerial & professional
Gap Gap change from 2006
2006
15.8 18.4 2.6 -2016
17.4 20.2 2.8 +0.22028
19.3 22.4 3.1 +0.5
Female life expectancy at 65 by class (years)
Routine & manual
Managerial & professional
Gap Gap change from 2006
200
6
18.9 21.3 2.4 -
201
6
19.8 22.8 3.0 +0.6
202
8
20.8 24.6 3.8 +1.4
England and Wales only.2006 results based on latest available ONS data: 2002/06 life expectancy by NS-SEC class. 2016 and 2028 results are TUC estimates based on average annual increase for NS-SEC group 1992/96-2002/06, adjusted by expected change in average annual increase for all England and Wales population between 1996-2006 and 2006-2028 (derived from ONS 2010-based period and cohort life expectancy tables).See http://www.tuc.org.uk/sites/default/files/tucfiles/State%20Pension%20Age.pdf
Male life expectancy at 65 by geography (years)
2011 2028 2028 Gap to East Dorset (change
from 2011)
Manchester 15.4 16.9 7.1 (+1.6)
Corby 16.5 18.2 5.8 (+1.4)
M’brough 16.5 18.4 5.6 (+1.2)
Female life expectancy at 65 by geography
(years)
2011 2028 2028 Gap to East
Dorset (change from
2011)
Manchester 18.8 20.3 7.7 (+2.9)
Corby 18.6 19.1 9 (+4.9)
M’brough 19 20.7 7.4 (+2.7)
2011 results based on latest available ONS data: 2009/11 life expectancy by local area. 2016 and 2028 results are TUC estimates based on average annual increase for each local 2000/02-2009/11, adjusted by expected change in average annual increase for all England population between 2002-2011 and 2011-2028 (derived from ONS 2010-based period and cohort life expectancy tables).Adapted from http://www.tuc.org.uk/sites/default/files/tucfiles/State%20Pension%20Age.pdf
Impact on SP outcomes
Across all groups, inequality in lifetime receipt of state pension will increase
By 2028, women receive 12.3% more than men
White-collar men receive 17.6% more than blue-collar, 20.4% for women
East Dorset pensioners receive around 50% more than Manchester men and Corby women
See http://www.tuc.org.uk/sites/default/files/tucfiles/State%20Pension%20Age.pdf
State pension age
Pensions Bill confirms SPA rise to 67 by 2028, but based on 2010 average life expectancy tables that have already been revised down
Raising SPA based on average life expectancy exacerbates enormous inequality
Autumn statement 2013 seems to contradict Pensions Bill; if nothing else, it pre-empts ‘independent’ review and even GAD’s formulaic approach
SPA compared
OECD average SPA in 2050 will be 65.6, UK will by 68 in mid-2030s
Only Ireland has accelerated SPA as quickly
UK is more unequal than most other European countries
SPA needs to rise but why so quickly – does the govt believe in its own economic strategy?
Independent commission
Need a lot more data, especially on socio-economic group and/or income distribution
Guided by average life expectancy but also life expectancy of lowest income decile
Must consider evidence on working in later life (conventional wisdom is wrong, skewed by lower female SPA)
Employee and employer representatives
Less frequent than every parliament
Linking state pension age to longevity: Tackling the fairness
challenge
Monday 10th February 2014
This event is kindly supported by Age UK
#SPAlongevity
