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Complex route

Steve Lewis Managing director The Retirement Partnership


Ian Duncan Smith has suggested that the state pension age could be automatically linked to increases in longevity. I understand it has been done in Holland, so there is a precedent for it. On the plus side, it does more accurately reflect the changes in the population and if you get a continued improvement in longevity, then you have got a mechanism to automatically reflect that in the state pension.

Personally, I am not enthusiastic about the idea because it is likely to be complex and confusing.

If Labour had not fudged the issue off the back of the Turner commission review and had been bolder about raising the state retirement age, this would not be an issue.

For anybody more that 10 or 15 years away from retirement, if you shift the goalposts a year or two further out, they might not like it but they can adapt to it. If you are only five years away from drawing your state pension and the Government suddenly says you have got to work another year, then that may cause problems.

And clearly, you would need to address employment law issues to ensure there is sufficient flexibility.

I would go for a review of retirement ages, for a bolder programme of increases, say, increase it to 70 by 2030, I would even countenance by 2025 and then park that there for a while. That would sufficiently reflect the changes in life expect-ancy we have experienced in the last 30 years and you could come back in another 15 years time, if necessary, and review it again.

Fixing it now, in a way that Labour tried and failed because they were not bold enough, will do. Trying to link it in some complex way to longevity and life expectancy is just going to make life messy for everybody.

The big stumbling block is the understandable emotional resistance to being told you have to work an extra year before you get your state pension more than the precise mechanism by which you reset the state pension age.

The trade-off should be, if you are going to go for, say, 70 by 2025 or 2030, you would then release so much money back into the exchequer that you then offset that by a substantial increase to the basic state pension.

You push the basic state pension up, you merge S2P and the basic state pension, so people just get one state pension and you push that basic state pension up into the range of £8,000 to £10,000 a year.

So, you would make real strides towards what is a strong policy from the Liberal Democrats of something resemblinga universal, generous basic state pension and I think you could sell that to the general population today.


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