Universal state pension age review raises flexibility options

The possibility of replacing the universal state pension age with something more tailored to people's individual needs has been raised in a Government-commissioned review.

Former CBI director general John Cridland was appointed as the Government's independent reviewer of state pension age in March and on Thursday a consultation was launched, seeking views on the state pension system of the future.

The review is tasked with eventually making recommendations on a suitable state pension age, with the aim of supporting affordability, fairness and fuller working lives.

The review's consultation document, which raises a wide range of questions about issues in people's retirement, asks: "What are the alternatives to a universal state pension age?"

The document said: "We also know that for many people, state pension age can be the most significant reference point in later life planning but a number of other factors are increasingly relevant."

These factors include some people having more flexible working patterns, living for longer and also having increased caring responsibilities for elderly family members.

The possibility of getting early access to the new state pension for those who have had a long working life was also raised, so for example someone starting work at 16 and having built up 50 years of national insurance contributions could become entitled to their state pension at 66 instead of at state pension age.

The review said currently, the majority of workers leave the labour market before they reach 63 years old - but "of this group we know that a significant number of people wish they had postponed their retirement".

The consultation also seeks to find out more about how any state pension age changes affect the self-employed, whether someone's ethnicity affects their pension outcomes and how lower pension outcomes for women can be taken into account. It will also examine how someone's life expectancy is affected by where they live.

It will also probe into how the housing market and people getting on the property ladder later in life and paying off mortgages into their later years will affect their ability to retire.

It said: We have seen a move to extend mortgages for customers until their 70s or even 80s by a number of high street banks."

The document also seeks to find out more about people experiencing "burnout" in certain jobs, such as ambulance workers, construction workers and teachers, meaning they are unable to continue with their career.

It said: "While some groups and some professions consider burnout point as the appropriate time to retire, others suggest that it is simply a point for an occupational health scheme to intervene, a change of duties or hours or a change of job.

"There may be scope for policy interventions to support people in this crucial transition point and Government might have a key role to play in that, alongside the individual and the employer."

To make its recommendations, the review needs to understand the lives of the working age population of today, who will start retiring or start considering their retirement mainly in the 2030s.

The Pensions Act 2014 increased the State Pension age to 67 by April 2028. The next increase to 68 was legislated in the Pensions Act 2007 and is due to start in April 2044. The review is focusing on state pension age arrangements beyond 2028.

The generations who may see their state pension age affected by the review include Baby Boomers (born between 1945 and 65), Generation X (born between 1966 and 1979) and Generation Y (born between 1980 and 2000).

There is also the potential for Generations X and Y to be affected by future state pension age reviews as they are legislated to occur at least once in every Parliament.

Mr Cridland said: "The future of the state pension age is a hugely important issue for this country. It must be fair and sustainable, and reflect changes in society. My interim report provides an insight into my developing thinking and poses a number of questions.

"Whatever recommendations I decide to make in my final report, they will be underpinned by the importance of effective communications about the state pension age. People need to be able to plan effectively for their own retirement."

The consultation closes on December 30.

A Department for Work and Pensions (DWP) spokesman said: "We welcome today's interim report on state pension age by John Cridland. His final report, due in spring 2017, will make recommendations to the Government on future State Pension age arrangements, with the key objectives of supporting affordability, fairness and fuller working lives for future generations.

Former pensions minister Ros Altmann said occupational, regional and income differences have so far been "ignored" by the state pension system.

Baroness Altmann said: "The current system is penalising those who are in poor health, possibly due to having had very long working lives in physically demanding jobs...

"The current rules favour higher earners, living in more prosperous areas and who have less strenuous jobs, or are in good health. A balance needs to be struck between controlling costs and improving social fairness."

Steve Webb, another former pensions minister, who is now director of policy at Royal London, said it is "vital to keep it simple".

Mr Webb said: "It is true that people in different parts of the country and different occupations may have lower life expectancy and poorer health outcomes.

"But the right response to this is to tackle those health inequalities at source rather than to use the blunt instrument of the state pension to solve these wider social and economic problems."