Hanging on for retirement?

While we welcome the review’s recommendations on wider actions to mitigate the impact of bringing the timetable forward for increases to the State Pension age – everyone will have their own opinion on whether his recommendations will meet the aims of being fair, affordable and supporting fuller working lives. Whatever your views on what the State Pension age should be, it’s important to remember that raising it does not automatically lead to everyone affected working for longer.

Currently, less than half of people are working the year before they reach State Pension age. While the State Pension age is an important factor in determining how long people work for, it is not the only one. People retire for all manner of reasons – perhaps because they want to, because they can, because a partner has retired or because they need to. We know that sometimes there is an illusion of choice about how and when many people retire, with many having to work for longer through necessity rather than seeing it as a positive and fulfilling choice.

Over recent decades the proportion of people in most age groups receiving incapacity benefit has declined or levelled off. This is for several reasons, including the fact that work-related health in some aspects has improved, many ex-industrial workers have retired, and the assessment system has changed. There is however one group that has seen a rapid increase in rates of incapacity benefit: women aged 60-64.

Why is this? It’s not due to some dramatic change in the health status of this group. Rather, the equalisation of female state pension age from 2010 has seen many women who would previously have retired, continue to remain in the working-age benefit system. And while raising the state pension age by one year might encourage those affected to work by on average one month longer it isn’t an automatic lever for increasing employment. Some have continued to work but others go in to, or remain on, work benefits such as Employment and Support Allowance.

When the state pension age increases to 66 in 2020, around an additional 700,000 65-year-olds will be brought into the working-age system. This is roughly the population of Leeds. If this cohort matched the rates of people not working due to a health condition of people in their early 60s of around 12%, we might expect around 85,000 people in this age group to be claiming an incapacity benefit.

As a society, we need to ask ourselves – is this the outcome that we want? Raising the state pension age may influence some to work for longer, but it will also lead to more people on incapacity benefits until they can draw state pension. Our recent response to the Work and Health Green paper has highlighted the need to support people with long term health conditions as they age. Without action, many will be left waiting for retirement, and with state pension age rising, more will be waiting for longer.

We look forward to seeing how the Government will respond to John Cridland’s recommendations. It is important for all of us, but for those who can’t work for health reasons, it matters even more.