Mounting Calls for State Pension Age Reform as DWP Urged to Avoid Delays
The topic of state pension age reform is gaining heightened attention as experts urge the Department for Work and Pensions (DWP) to act without delay. Analysts advocate for a systematic approach to determine changes in retirement age, emphasizing the need for immediate reform.
Current Review on State Pension Age
The DWP is currently conducting its third review of the state pension age, focusing on intergenerational fairness. This review, led by Dr. Suzy Morrissey from the Pensions Policy Institute, is unique in that it does not mandate an increase in the pension age.
Analyzing Sustainability and Fairness
Dr. Morrissey’s review aims to evaluate how the pension age impacts sustainability. It will also explore automatic adjustment mechanisms that are being employed in other OECD countries. She highlighted that such mechanisms are absent in the UK, a gap she is tasked with examining.
- The DWP has requested an analysis of the pension age’s effect on various demographic groups.
- Dr. Morrissey is particularly interested in experiences from different sexes, regions, and job types.
Concerns Over Increasing Pension Age
During the recent Pensions UK event, industry leaders voiced concerns over potential increases in the pension age. They warned that this could exacerbate existing inequalities while recognizing the necessity for reforms to ensure long-term sustainability.
Financial Insights
Ben Franklin, deputy chief executive of the International Longevity Centre, cautioned that the rising pension age could worsen inequalities. He pointed out that the UK’s pension expenditures, although reasonable as a share of GDP, require urgent attention.
- Pension debt approaches 100% of GDP.
- 2.8 million working-age individuals in the UK remain economically inactive.
Franklin stressed that addressing health and employment issues is crucial for the success of any pension age changes. He argued for better job design to accommodate workers with health needs.
Pension System Inequities
Laurence O’Brien, a research economist from the Institute for Fiscal Studies (IFS), echoed these concerns. He explained that raising the pension age from 67 to 68 could greatly diminish income for those who die young, while having little effect on those who live longer.
Proposed Framework for Sustainability
The IFS put forth a four-point framework aimed at enhancing the sustainability of the pension system:
- Maintain the pension at a fixed proportion of average earnings.
- Ensure inflation protection
- Avoid means-testing
- Link pension age increases to longevity gains
Mr. O’Brien emphasized the need to prevent means-testing, as it could undermine retirement savings incentives. He also suggested looking into Australia’s adjustment system as a potential model for the UK.
The mounting calls for state pension age reform highlight an urgent need for comprehensive analysis and action to address existing disparities in the system and ensure its long-term viability.
