Common sense plan to tackle pension timebomb
Not great news for anyone born between 1970-78 and there are 7 million voters in that category. Some cynics have suggested the timing of the announcement – on the same day as the unveiling of headline-grabbing BBC salaries – may not have been entirely coincidental. Particularly since the original recommendation of the government-commissioned Cridland Report, that the “State Pension age should rise to age 68 over a two year period starting in 2037 and ending in 2039”, dates back to March this year.
Regardless of the politics, the decision is eminently sensible and, if anything, overdue. If you’re not convinced, take a look at this graph, from the Office for National Statistics.
The state pension system dates back, in its current form, to the late 1940s. At that time, SPA was 65 for men and 60 for women. As the graph shows, in 1951 average life expectancy at birth was 66 for males, and 71 for females. And as the vast majority of state pension recipients were men, the cost – though substantial – was manageable. Most people reached pension age, received their pension for a year or two and then did the decent thing and popped off.
By 2011, male and female life expectancies had jumped, respectively, to 79 and 83. Yet the SPA had remained unchanged at 65 for men, and had only just begun to edge up, from 60 to 61 (it’ll be 65 next year), for women. So while average life expectancy had increased by more than ten years, the state pension was still payable at the same age as 60 years previously. I’m no economist, but even I can see there’s a potential problem there.
In fact, of every pound spent by government, 20p now goes on pensions – more than health (18p), other welfare benefits (14p) or education (11p). That’s money that has to be paid by today’s taxpayers to today’s pensioners.
Seen in these terms, the case for increasing the pension age seems undeniable.