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LucyGransnet (GNHQ) Thu 19-Nov-15 11:03:28

Raising the pension age: is it really worth it?

We hear from social policy expert John Macnicol on the coming changes to the state pension age - and why he believes the government should be considering the alternatives.

John Macnicol

Raising the pension age: is it really worth it?

Posted on: Thu 19-Nov-15 11:03:28


Lead photo

Who will lose most under the new State Pension policy?

Retirement has long presented a challenge for advanced industrial societies: it contributes greatly to economic efficiency and workforce turnover, yet it is also very expensive in terms of State Pension costs. Recent years have seen moves to raise state pension ages in the UK. They are henceforth to be linked to life expectancy, so that they could rise to 68 by the mid 2030s and 69 by the late 2040s.

Many commentators, particularly those from the business sector, would like to see ages even higher than this. Ostensibly, this is being done in response to demographic and fiscal pressures. Yet the annual increases in longevity are relatively small, and the real problem is the size of the age cohorts that will move into retirement in the future (caused by high birth rates in the late 1940s and the mid 1960s and by net in-migration). A little-mentioned motive is the neoliberal strategy of attempting to create economic growth by expanding labour supply, plus the fact that raising state pension ages has been a cause on the political right for decades (for example, Mrs Thatcher's cabinet considered raising the age to 70 in 1989).

...working another few years might not present many problems for middle class, white collar people, but it will be an impossibility for those worn out by heavy manual labour.

Is this a wise strategy? The awkward fact is that there is no necessary connection between the size of a workforce and its total productivity: the latter is much more a function of factors like technology, the price of raw materials, a country’s industrial structure, and so on. One can see this clearly illustrated in the cases of Germany (considered to be a model of economic virtue) and Greece (considered to be economically dysfunctional in many quarters), both of which have remarkably similar average ages of retirement and proportions of their populations aged 65+. In addition, there are several troubling issues: whether extending working lives will damage the job prospects of the young – an especially sensitive issue at a time of high youth unemployment; the fact that, were state pension ages raised to 69 tomorrow, some 1,500,000 to 3,500,000 new jobs would have to be created; how to overcome the manifest class and regional unfairness that will be exacerbated, given that de facto retirement ages vary greatly by social class, as does life expectancy at later ages (there is a seven-year difference in life expectancy at birth between the top and the bottom social classes); finally, working another few years might not present many problems for middle class, white collar people, but it will be an impossibility for those worn out by heavy manual labour.

There are other, more imaginative, humane and realistic policy alternatives – but they have been hardly considered: a citizen's income for all aged 60+ to supplement the diminishing earnings that most older workers experience, payable as of right and replacing the state pension; 'age management' policies targeted at older workers; employment quotas for older people, and so on.

Some of these would be quite controversial – but the direction in which we are heading may prove to be even more so.

John Macnicol is Visiting Professor in Social Policy at the London School of Economics. His new book, Neoliberalising Old Age is published by Cambridge University Press and available from Amazon.

By John Macnicol


JessM Fri 20-Nov-15 18:15:32

Galen that was £53k salary being referred to, not the pension.

Galen Fri 20-Nov-15 18:36:56

My civil service pension is not as high as £35k either

Maggiemaybe Fri 20-Nov-15 20:41:01

Senior teachers, senior academics and senior managers in public sector all get over £53k Wilma.

This is not correct, JessM. The current leadership group pay range for schools, for example, starts at £38,598.

I believe the average public sector pension is around £5,000. I do know people who have retired from the private sector, from banks in particular, with significantly better pensions than comparable public sector workers (in a couple of cases without ever having had to contribute a penny). Like your cousin, they are the lucky minority.

Many women now in their early sixties are not so lucky, cannot work due to ill health or family commitments and were relying on receiving their state pension at 60. Some are now suffering real hardship.

mcem Sat 21-Nov-15 09:06:47

Ĺucky I'd like to point out that I gave details of my total household income so by adding your pensions together your total income would clearly exceed mine. The safety net of pension credit still exists meantime. By making large superannuation contributions and buying back and avc's I have succeeded in putting myself just outside the range to be entitled to council tax benefits, free boiler replacement etc etc.
Thanks to my late parents i was able to pay off my mortgage shortly before retirement.
I' m not complaining about my income which is adequate but would certainly complain if it's assumed that all public sector pensions are either free or extremely ģenerous.
The highest paid headteacher I know earns 60k+ but that's pretty unusual.

tigga Sat 21-Nov-15 09:11:55

it actually makes me feel like crying reading this
Your State Pension age67 years
When you’ll reach State Pension age14 November 2028
How much per week you may get£115.95

ive worked since the day i left school had 2 children and went straight back to work im now 54 and never had an easy life so if i even live to retire it will be a miracle, tory strategy work 60 hrs a week on a pittance called minimum wage, retire when your too old to enjoy it then die, thank you

elfies Sat 21-Nov-15 09:13:05

And what of the ladies encouraged to pay the married womans 'small' stamp as they'd get a pension on their husbands contribution .
I get £300 a month pension as I worked the wrong years when my children were small

Gracesgran Sat 21-Nov-15 09:14:14

I don't know what you have been looking at re the figures for Pension Credit mcem but your income, rather than being "not quite close enough to the level where I can claim pension credit" is almost twice the level at which you can claim it.

BRedhead59 Sat 21-Nov-15 09:18:46

I have four college friends all in the 1952/3 college year we all get our pensions at different times with as much as three years difference. I agree with raising the retirement age in line with men, but gradually not so those of the same age are treated so differently.

Gracesgran Sat 21-Nov-15 09:25:57

There is going to be a "balancing" in pensions which was announced last night I believe.

Those paying in to these very good final salary pensions have, up to now, been about to pay less NI by opting out. There has not been a lot about this yet but, as I understand it, opting out is ending so the NI contributions will go up to the full amount. Of course people paying into these very good final salary pensions, where they still exist, will be well advised to go on doing so as they still get the same benefit from that pension.

This will sort out some of the issues with the new Single Tier Pension where people have discovered they will not get the full amount because they have opted out of NI contributions. Of course, no one will never get less than they would have done under the old system and they will have the pension the NI amounts have been paid into.

island Sat 21-Nov-15 09:32:33

Look at WASPA on facebook they are campaigning against the inequality of the retirement ages for women born in the 50s.

Maggiemaybe Sat 21-Nov-15 09:52:14

This is the link to WASPI's page:

And this to their petition to Government. The more signatures it gets, the more chance there is of the issue being taken seriously:

There has been real injustice here. The Government has promised that in future no one will be given less than 10 years notice of changes to their pension age, to allow them time to plan and re-adjust. Many of the women affected have had less than 2 years notice.

MammaN Sat 21-Nov-15 09:56:27

I'm with you Elfies. We were encouraged to pay the married women's stamp and I continued with this for years - until I realised that I was actually paying more than if I'd been paying a full stamp. Then they decided to change the rules, removing the facility to claim on husbands contributions (except up to a very low limit). Having been part time for most of my working life I wasn't allowed to contribute to a pension in the earlier years - it simply wasn't allowed. Now, obviously I won't benefit from the new higher state pension. Consequently, having worked my whole life I have very little state pension and minimal private pension.

jocork Sat 21-Nov-15 10:01:12

Welshwife I think you'll find that with 40 years service at 1/80 salary you would get 50% of final salary not 40%(40/80 =1/2 = 50%)
I too work in the public sector, previously in the NHS for 10 years and currently as a learning support assistant in a school. My current salary is so low that I anticipate being better off on my combined pensions as I should be entitled to the new flat rate pension at age 65 and 11 months although it may be reduced due to contracting out. Thankfully I now get credits for all the years when I was an almost full time mum only working a few hours a week and not earning enough to pay NI. Otherwise I'd really be in trouble. Despite generous public sector pensions I will still have to downsize to release capital to top up my pension and pay off the mortgage which isn't due to end until I am 79! If I'd been able to retire at 60 I would have struggled to make ends meet as my pensions would be significantly lower and even with a large house to downsize it would have been a struggle to make the money last if I live as long as I hope. So in some ways I'm glad I've had to work longer as at least when I do retire I will have enough to survive on.

allule Sat 21-Nov-15 10:21:30

Taking into account the wide variations in life expectancy, perhaps the fairest system would be for everyone to have an actuary assess their life expectancy at the age of, say, fifty, and have their retirement age calculated accordingly.
Not sure how acceptance this would be.

Maggiemaybe Sat 21-Nov-15 10:21:32

You need to ask for a pension forecast, jocork. I don't want to alarm you, but your flat rate pension may be considerably reduced, as under the new arrangements the years you were opted out will not count at all towards it.

gillybob Sat 21-Nov-15 10:32:27

I am exactly the same as you tigga I have worked from being 16. I took the least time I could as "maternity leave" (a few weeks in each case) not by choice but by necessity. I will be working full time until I am at least 67.5 but as I mentioned earlier it will probably be around 70 by then. Miserable thought isn't it?

MaryXYX Sat 21-Nov-15 10:40:20

Like many people I was made redundant shortly after passing the original retirement age. Of course I had no chance of finding another job so the Department Of Unemployment could categorise me as work shy, despite a long working life.

It isn't really about demographics, it's just that paying the unemployment pittance - or denying it - is a lot cheaper for the government than paying pensions.

Gracesgran Sat 21-Nov-15 10:42:57

The reduction in the Single Tier pension will not put you in a worse position than you would have been under the old system Maggiemaybe so, while not brilliant as some people were expecting the "opt out" to cover them both in the State Pension and the private pension scheme it had been paid into, there is at least a floor. It has always been the case that this was taken into account and reduced the state pension as I understand it.

The aim, and this seems to be the reason why you will no longer be able to opt out from the end of this month, appears to be that everyone will have a Single Tier State Pension which is almost always above the Pension Guarantee Credit so that if you were to withdraw your private pension and spend it all you could not go back to the state for more. Currently, if I remember rightly, about 40% of pensioners get Pension Credit and by 2050 this will have reduced to about 10%*.

These are just facts but my personal opinion is that the women born between April 1952 and July 1953 will lose out more than any others - which seems very unfair. However, as my mother would have said (about life so I slightly misquote smile ) "who said the government would ever be fair".


Maggiemaybe Sat 21-Nov-15 12:30:38

The reduction in the Single Tier pension will not put you in a worse position than you would have been. Under the old system Maggiemaybe

I know that,*Gracesgran*, but jocork and others may not, which is why I would advise anyone to get a pension forecast. The opted out years make a massive difference.

Philp17 Sat 21-Nov-15 12:31:09

What an interesting article. Another factor, not often mentioned is the economic contribution retired people make. I support my mum who is 91, volunteer for the local wildlife trust, help run various local charity events. My DH drives older, less mobile neighbours to medical appointments and is treasurer for a local charity. We travel lots and contribute to the tourism economy at home and abroad. I have been very fortunate to retire at 60, however I am still economically active. If we are all to work until we drop, the losses in many aspects of the economy will be difficult to calculate.

Maggiemaybe Sat 21-Nov-15 12:34:29

Though I'm pretty sure they didn't reduce the basic state pension entitlement under the current system - they reduced the additional SERPS/additional pension element only.

nannymoocow Sat 21-Nov-15 13:08:38

Thanks for also alerting ladies to sign petition and like Facebook WASPI page Maggiemaybe. The more people who sign the online petition the better.

Welshwife Sat 21-Nov-15 13:24:10

Yes jocork you are right it is 50% but very few women were able to teach that long - are they still giving credit for years spent at home with young children? There are very strange rules about contributions and when they can be paid by to benefit from a higher pension. The time off with children meant that I also had not paid sufficient years to have a full state pension but as I had needed to pay earnings related and graduated contributions the small amount extra in pension payments meant I could not have any top up.
As to the married woman's contributions - in the 60s ( must have been when I was first married) I can remember being informed that I had a choice of paying married women's NI or full NI - but that by not paying full contributions I would not receive the full single person's pension but only that of a wife - my then husband understood the implications and we decided I should pay the full rate which was a couple of pounds a week as opposed to a few pence. At that time the difference was a good percentage extra.

WilmaKnickersfit Sat 21-Nov-15 13:36:28

JessM your first post never mentioned senior public sector staff, you just lumped all public sector staff into your sweeping statement. I wonder how many of the people you mention who retired early have partners with a decent income, enabling them to retire early? Has it occurred to you that the man who bought a brand new Audi may have used his lump sum to pay for it? You don't know the financial circumstances of any of the people you mention and quite honestly your posts have a feeling of envy about them. I will be 67 when my State pension is payable and I hope I live at least 20 years after that so I can enjoy being retired. God forbid any of us live too long after retirement on the pensions we paid for when we were working our socks off. Perhaps we should all stop planning for our retirement because according to you we'll be a burden on the State and should only live for a few years in penury so that we don't cause hardship to the younger generations.

janeainsworth Sat 21-Nov-15 13:48:49

Jess There's a crucial difference between public sector pensions and private sector pensions in that the former are defined benefit, whereas the latter are defined contribution.

What that means is that someone retiring with a public sector pension will have the same level of pension no matter what their lifestyle or life expectancy might be.
In contrast, a private pension involves the purchase of an annuity and the level of benefit is dependent on actuarial calculations of how long you are going to live, based on medical history and lifestyle risk factors.
Perhaps it would be fairer to everyone if public sector pensions were calculated in a similar way, so that those fortunate enough to have reached their sixties without acquiring any life limiting conditions would get less than others in the short term but maintaining a level of security over their lifetimes.