A petition signed by 76,972 signatories this summer called on the chancellor for a lower pension age to decrease eligibility from 66 to 60 years for both men and women. The petition argued that the state pension age should be lowered to 60 with “imminent effect” due to the impacts of the pandemic on the jobs market. It also argues that this is necessary to ‘free up jobs for young people’.
Lower Pension Age Recommended
As it stands, both men and women qualify to receive a state pension at 66 years of age. This was raised in 2010 from the lower pension age of 60 for women and 65 for men. Pensioners will need to have contributed 35 qualifying years to receive the full state pension which amounts to £179.60 per week. Before the Pensions Act 1995, the state pension age had been 60 for women, and 65 for men. The Act changed this so that the women’s pension age would be made equal with men, but that the transition should only be phased in from 2010 to 2020. In 2006, a cross party Parliamentary report again recommended equalisation of ages on the basis of equal treatment of both sexes. It also recommended a rise in the state pension age for both men and women to 68 between 2024 and 2046. The rationale for the age rise was that people would be living longer in the future. This was put into effect by the Pensions Act 2007. However, when the Conservative and Liberal-Democrat coalition took power, the Pensions Act 2011 accelerated the rise from the existing lower pension age, to now 66 for both men and women by 6 October 2020. Under the Pensions Act 2014, the coalition government again accelerated the rise in the state pension age to 67 by 6 April 2028.
The recent petition urged action to lower pension age, particularly due to the pandemic. It also highlights those who have been impacted by the uprating to their state pension age. In May 2019, a challenge in the High Court failed to reverse decisions to accelerate the equalisation of the pension ages on the ground that not enough notice was given. The petition continues: “Young people are struggling to find work and losing their jobs, due to the pandemic… Why not allow older people to retire earlier, thereby freeing up jobs for young people?” Author of the petition Gwyneth Brown proposes allowing workers to retire at the lower pension age of 60 will afford better equality for the younger generations by making available more places for younger workers in the jobs market. However the government states “Raising State Pension age in line with life expectancy changes has been the policy of successive administrations over many years.” Furthermore they have announced plans to invest billions of pounds of pension savings in new infrastructure and start-up businesses with the Long Term Asset Fund expected to launch in November 2021.
At present, the state pension increases each year in line with the rising cost of living seen in the Consumer Prices Index (CPI) measure of inflation, increasing average wages, or 2.5%, whichever is highest. This is known as the triple lock, and it is a Conservative manifesto pledge for the five years of this Parliament. Official forecasts suggest that average earnings will be the highest of these three, by a considerable margin. This has been effected in large part by the economic bounce back following the lifting of lockdown restrictions, which were introduced to tackle the spread of Covid-19. While workers return to work on full pay, from furlough, this appears on the record as a large rise in average earnings. Job losses have also affected those in low-paid work too because those remaining in work are paid more. This has led to a unique, anomalous economic climate. The Bank of England predicts that average earnings could rise by 8% under these conditions, which would influence a rise in the state pension under the triple lock strategy. That is considerably higher than rises seen under the triple lock in the last decade. Chancellor Rishi Sunak said the government must “wait for the actual numbers to be finalised”, which he said were currently “speculation”, before looking at the policy “properly at the appropriate time”. It is a manifesto promise, but the chancellor has hinted that the triple lock could be broken to ensure “fairness for pensioners and taxpayers”. There is no reason in law why the chancellor cannot change the way earnings are judged in the triple lock system. The guarantee was introduced by the Conservative-Liberal Democrat coalition to ensure pensioners did not see any rise in their state pension being overtaken by the rising cost of living, nor that the working population would see a much bigger income rise than them each year. It has proved to be an expensive policy for the government. Mr Sunak has given a broad hint that the government could temporarily break the pension triple lock this year in order to prevent the Treasury being landed with a £3bn uprating bill.
The Department for Work and Pensions responded on 28th July with this statement:
“Parliament has voted to equalise the State Pension age (SPa) and subsequent retirement ages for men and women. Reducing it to 60 is neither affordable nor fair to tax payers and future generations. The latest Office for National Statistics data shows that the number of people over SPa compared to the number of people of working age is expected to increase. On average, people are living longer, and increasing SPa in line with life expectancy changes has been the approach of successive governments over many years. It helps to maintain the cost and sustainability of the State Pension in the long term. The State Pension is funded through the tax contributions of the current working-age population. Reducing the SPa to 60 would therefore increase the tax burden of the current working-age population. The government have previously estimated that had we not put in place any increases in SPa for both men and women, the total additional cost to taxpayers would have been around £215 billion for the period 2010/11 to 2025/26, in 2018/19 prices. This figure takes into account State Pension, other pensioner benefits, and savings made on working age benefits. The 2019 report that details these costs can be found here: https://www.gov.uk/government/publications/analysis-relating-to-state-pension-age-changes-from-the-1995-and-2011-pensions-acts/analysis-relating-to-state-pension-age-changes-from-the-1995-and-2011-pensions-acts The Government has provided an unprecedented amount of support via our plan for jobs to help those of all ages find work and get the skills they need to return to work. Our Plan for Jobs has been designed to deliver targeted support to those most in need, and we continue to provide tailored programmes for younger people who are unemployed. Evidence shows that unemployed young people can gain employment more quickly than older age groups and we have built on our existing programmes by providing further support for young people during the pandemic including the DWP Youth Offer, which has provided wrap-around support for 18-24-year-olds in the Intensive Work search regime of Universal Credit, since September 2020, and the £2 billion Kickstart scheme which funds the direct creation of additional jobs for young people at risk of long-term unemployment giving them the chance to build their confidence and skills in the workplace, and to gain experience that will improve their chances of progressing to find long-term, sustainable work. Since the launch of Kickstart in September, employers have created over 247,000 approved vacancies for young people, including engineering, construction, adult social care and retail and over 44,000 young people have started in their Kickstart job.
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