Finance and Business

Does the Pension Age Need to be Raised? 

The retirement age in the UK may need to be rise to 71, according to experts. As the debate starts, lets delve into the key findings and opinions surrounding this proposed change, exploring its potential impact on workers, public finance, and the generations to come.

Current and Future Pension Age

The current state pension age of 66 is set to increase to 67 between May 2026 and March 2028. Further increments are anticipated, with expectations of reaching 68 by 2044. However, recent research indicates that these adjustments might fall short of addressing the broader demographic challenges.

Demographic Challenges and Health Considerations

The research, conducted by Les Mayhew, suggests that a state pension age of 70 or 71 may be necessary to maintain the current ratio of workers to pensioners. Moreover, preventable ill health is identified as a critical factor leading to early workforce exits. This brings into question the sustainability of the proposed changes, urging a more nuanced approach.

Health and Economic Implications

By the age of 70, only half of adults in England and Wales are disability-free and capable of working. A shrinking working population, coupled with a substantial economically inactive segment, presents challenges in sustaining the tax base for pensions and addressing labour shortages. These factors are crucial considerations as pensioner benefits are projected to cost the UK government £136 billion in 2023-24.

Expert Opinions and Policy Considerations

Jonathan Cribb from the Institute for Fiscal Studies acknowledges the need for a higher pension age but stresses the importance of broader cost-saving measures. He cautions against disproportionately impacting people with shorter life expectancies, advocating for a realistic and equitable approach.

The Intergenerational Foundation supports a rise in pension age but questions the distribution of the associated costs. Highlighting the wealth disparities between generations, they propose a wealth tax to finance retirement and ease the economic burden on younger generations.

The Call for Prevention and Support

Andrew Scott, co-author of the 100-Year Life, emphasises the importance of preventative measures throughout adulthood. He opposes a simple increase in the state pension age, advocating for policies that promote health and productivity from an early age.

David Finch from the Health Foundation raises concerns about exacerbating existing health inequalities. He calls for increased support for people out of work due to health issues, urging employers to adapt roles and maintain contact with employees on sick leave.

Government Response and Future Prospects

The government, addressing concerns, asserts its commitment to ensuring a sustainable and fair state pension. Initiatives such as £70 million in employment and skills support for the over-50s and a £2.5 billion Back to Work plan aim to navigate the challenges posed by an ageing population.

Striking a Balance for the Future

As discussions around pension age intensify, finding a balanced solution becomes imperative. The proposed rise to 71 sparks debates about health, economic implications, and intergenerational fairness. Lessons from expert opinions and calls for preventative measures underscore the need for a holistic approach that considers the well-being of workers at different life stages.