State pension age ‘could rise above lifespan’ in poorer areas, say MPs

The state pension age may have to rise to levels above the average lifespan of men in the UK’s poorer areas, MPs say.

The Work and Pensions Committee said the age would need to rise above 70 to make the current policy of increasing the pension amount sustainable.

State pensions rise each year by the inflation rate or whichever is highest of average earnings or 2.5% – as part of the so-called pensions triple-lock.

The government said it was committed to the policy until 2020 at least.

As a result of triple-lock policy, the state pension has risen by £1,100 since 2010.

In November the committee said the policy should be scrapped.

‘Disproportionate effect’

The committee commissioned the Institute for Fiscal Studies to estimate the extra state pension age increases that would be needed to maintain expenditure at about 6% of GDP (Gross Domestic Product).

It found that the state pension age would need to be 70.5 years by 2060.

But the committee’s research found that in deprived areas of England and Scotland, male life expectancy was below that level.

Currently, the state pension age is set to be 67 for both men and women by 2028.

The committee said:

Male life expectancy was below 70.5 in 162 areas in Scotland

The lowest male life expectancy was 62.5 years in the Parkhead West and Barrowfield area of Glasgow. In that area, female life expectancy was 70.1 years

Male life expectancy was below 70.5 in 26 areas in England, including Blackpool, Manchester, Teesside, Leicester, east London and the Wirral

The lowest male expectancy in England was 67.5 years in the centre of Blackpool

By contrast, male life expectancy in the area of Westminster, which includes Mayfair and Covent Garden, was 92.9 years, 25 years higher

Frank Field, committee chairman, said: “With the triple-lock in place, the only way state pension expenditure can be made sustainable is to keep raising the state pension age.

“This has the effect of excluding ever more people from the state pension altogether.

“Such people will disproportionately be from more deprived areas and manual occupations, while those benefitting most will be the relatively prosperous.”

He said that the state pension will be at a level by 2020 where it will provide a “decent minimum income” for the older generation and the triple-lock “will have done its job and it will be time therefore to retire it”.

Instead of the triple-lock, the committee said the new state pension and basic state pension could be linked simply to average earnings – which the Institute for Fiscal Studies estimates would save 0.8% of GDP (Gross Domestic Product) a year.

That would be a real terms reduction of £15bn at today’s prices, the equivalent to 4p on the basic rate of income tax, it said.

Historically, pensions were linked to inflation rather than earnings, which reduced pensioner incomes relative to those of the working population.

Source: BBC