3 Aug 2016
The state pension age will rise again - how to make it fair to all?
Our population is getting older, yet just raising the state pension age without other actions will be a poor response to these challenges.
In ten years there will be nearly 20 per cent more people aged over 65. The state pension age is therefore a key issue for Government, and Sir John Cridland has been asked to carry out a review of the state pension age. His report, due by Easter next year, is expected to recommend an increase.
Yet just raising the state pension age without other actions will be a poor response to these challenges. It has to be possible for more people to be able to work for longer, to earn enough to avoid a drastic reduction in living standards. By retiring at 65 instead of 55, an average earner could have over £200,000 in extra income and increase their pension pot by 60 per cent.
But many people leave the labour market well before the state pension age. Between the age of 55 and 60, the employment rate falls from 80 per cent to 65 per cent for men, and from 73 per cent to 51 per cent for women.
The Government has not yet developed a suitable strategy to enable more people aged 50 and over to work later in life. This is surprising, as the economic benefits would be great. If the employment rate of the 50–64 age group matched that of those aged 35–49, it would boost UK GDP by £88 billion per annum. But this requires a significant shift in the labour market.
The business case for a major shift in attitudes towards older workers is clear. Employers will soon face major labour supply shortages. Between 2012 and 2022, 12.5 million job vacancies will occur from people leaving the workforce and an additional 2 million new jobs will be created. With only 7 million new young people entering the workforce, recruiting and retaining older workers will be critical, particularly as it is now much less likely that the shortfall can be filled by migration as we move to exit the EU.
Some businesses have recognised the value of an age-diverse workforce. B&Q has operated without a default retirement age for over 15 years, and aims to provide age-neutral benefits for its 32,000 employees. Barclays and National Express have apprenticeship schemes aimed at older workers, putting them at the forefront of corporate initiatives to widen the age diversity of workforces.
Last week Damian Hinds, the Employment Minister, called for businesses to create more opportunities for older workers. This is a welcome step towards the government and business harnessing the benefits that older workers can bring to both workplaces and the economy.
This piece first appeared in The Times.
(Geoffrey Filkin chaired the House of Lords Select Committee which produced the Ready for Ageing report and is now Chair of the Centre for Ageing Better.
