Out-Law News 3 min. read
17 Oct 2016, 3:49 pm
Businessman John Cridland is now seeking views from the public on how best to reform the SPA, in order to ensure that it remains "affordable and fair for all" beyond 2028. The consultation runs until the end of the year, and Cridland is due to present his final recommendations to the government by May 2017.
Among the issues raised by Cridland in his interim report is the case for an alternative to the universal SPA model, which would "[recognise] that the nature of work and retirement is changing as people move from the old model of a fixed retirement age and a defined period of retirement to a more flexible approach, where they may work part-time or change career in later life".
He is also keen to hear from those who particularly rely on the SPA to provide them with an income in later life, and who will therefore be most affected by any future changes to the rules or increase in SPA. These groups include women, carers, those affected by poor health or disability in later life and the self-employed.
"The choice of state pension age is not a decision which can be taken lightly, as it affects when people across society decide to retire and has a significant impact on public finances," Cridland said in his report.
"The future of the [SPA] is a hugely important issue for this country. It must be fair and sustainable, and reflect changes in society. If any changes are to be made to the [SPA], additional support may be required to mitigate the impact on the seriously affected groups discussed above and smooth their transition between work and retirement," he said.
The SPA for women in the UK is due to rise from 60 to 65 to match that of men from 2018, before it increases to 66 for both sexes in October 2020 and to 67 by 2028. Legislation requires the government to commission an independent review of the SPA once every parliament to ensure that the system remains sustainable given changes in life expectancy. Life expectancy for those born in 2016 is currently 90.6 years for men and 93.5 years for women, but there are significant variations between those from different social backgrounds and living in different parts of the country.
Cridland has come to no conclusions as part of his interim report, but has said that there is a need for a better balance between affordability and fairness under the current system. The UK is already on course to have the highest retirement age of any of the OECD member countries by 2060, according to the report. However, the cost of the UK's state pension system is still projected to rise from 5.5% of GDP to 7.1% by 2044, in part due to the government's 'triple lock' guarantee of increases to the SPA.
Although there is "value" in there being a clear point in time at which the state will offer retirement income, the report also suggests that some workers would benefit from earlier or later access to the state pension. For example, those who started work at the age of 16, particularly in manual jobs, may benefit from earlier retirement after 50 years of National Insurance contributions. The report also addresses the effects of 'burnout' on certain professions, leading to the likes of ambulance technicians, construction workers and teachers needing to retire earlier.
The report also suggests that encouraging those who are able to do so to work longer would help counter the impact of increased longevity on the state pension system. Currently, 1.2 million people aged 65 or over continue to work, but a "significant proportion" of people also drop out of the labour market early due to ill health and other factors, according to the report.
Pensions expert Carolyn Saunders of Pinsent Masons, the law firm behind Out-Law.com, said that it was "encouraging" to see the emphasis Cridland was placing on 'fuller working lives' as part of his research.
"However, this is something that needs to be considered in the context of the employment opportunities available in later life," she said.
"Last week's call by MPs on the Science and Technology Committee for the government to establish a commission to look at the issues caused by artificial intelligence, is very timely," she said.