Work and Pensions Committee
Oral evidence: State Pension Age Review, HC 1125
Wednesday 22 February 2023
Ordered by the House of Commons to be published on 22 February 2023.
Members present: Sir Stephen Timms (Chair); Debbie Abrahams; David Linden; Steve McCabe; Selaine Saxby; Dr Ben Spencer; Sir Desmond Swayne.
Questions 1 - 63
Witnesses
I: John Cridland, First Independent Reviewer of the State Pension Age (2016–17); and Martin Clarke, Government Actuary.
II: Sally West, Policy Manager for Income and Poverty, Age UK; Jack Jones, Pensions Policy Officer, TUC; Professor Hilary Land, Emeritus Professor, University of Bristol and member of the Women’s Budget Group Policy Advisory Group; and Professor Les Mayhew, International Longevity Centre and Bayes Business School.
Witnesses: John Cridland and Martin Clarke.
Q1 Chair: Welcome, everybody, to this meeting of the Work and Pensions Select Committee for an opportunity for us to take evidence on the review of the state pension age. We warmly welcome the two witnesses joining us for our first panel this morning. I will ask each of you to tell us who you are, starting with John Cridland.
John Cridland: Thank you, Mr Chairman. I am John Cridland. In 2017 I completed the first independent review of the state pension age, as required by the Pensions Act, and I reported in 2017. I am today the Chairman of the Home Group, which is a large housing association.
Martin Clarke: Thank you, Chairman. I am Martin Clarke, the Government Actuary and I have been in post since 2014.
Q2 Chair: Thank you both very much. I will put the first question to you, John. When you did the exercise six years ago, you produced an interim report and then your final report was published four months before a Government decision was announced. Was the public debate that enabled ahead of the Government decision a helpful debate in your view?
John Cridland: Most certainly it was. Clearly there is a huge amount of expertise in civil society, as well as in this great House, about these issues. I was asked to do the independent review, but I needed to draw on that expertise. The issues were challenging; they were difficult. There were no easy answers, but the interim report was very successful, in my view, in strengthening the quality of the final report by allowing an alliance of interested parties to inform me where I might have misunderstood or got things wrong or missed key things. With the final report, I clearly wished to have an opportunity in March 2017 to say my piece, because that is what I had been asked to do. I was independent. I fully respected it was entirely the right of Ministers of the Crown to reach their own decisions and bring those to Parliament.
I think that the separation of those two was helpful because my report was well received in some quarters and not well received in others, in both wider society and Whitehall. There was a general election in between my publication and the Government’s decision making. I am a great believer in sleeping on things and I think my report being published enabled everybody to sleep on things before Ministers made their decisions.
Q3 Chair: Looking back on it, was there a reasonably lively debate at the time about the issues that you had raised?
John Cridland: Indeed, a very lively debate. Clearly there was the constant creative tension between the needs of pensioners and the next generation of pensioners and the needs of taxpayers and Government as a custodian of taxpayers and efficient use of the public finances. There were no easy answers here. As many of us, but not all of us, have the blessing of living longer, and many of us, but not all of us, have the blessing of living longer healthily, clearly there has to be a logic to make it affordable and fair between generations that the pension age goes up. The challenge was how far and how fast. When I reported, there were those in Government who I felt I should have gone further and there were many, particularly in trade unions—and I fully respect their views—and in NGOs, who felt I had gone too far.
Q4 Chair: Was there any sort of contention at the time about whether it was appropriate for you to publish the report before the Government made their decision?
John Cridland: I don’t remember it being contentious. At the very end of 2015, when I was asked by the then Secretary of State for Pensions to take on this exercise, it was just that was part of the plan, that the Act required the Secretary of State to be advised by two reports: my report and the Government Actuary’s report. It was baked in at that time that the two would be published and then Ministers would decide. I don’t remember it being controversial.
Q5 Chair: Something that we have commented on—and I think it is very regrettable—is that this time nothing apparently is to be published until the Government decision is announced. I think the debate that you describe would have been a helpful one to have had this time as well.
Can I ask both of you, what are the main changes you think there have been since 2017, since that previous review, that the review this time needs to take account of? I will start with you, John.
John Cridland: When I was doing work in 2016 I was mainly using ONS statistics from 2014. As you appreciate, there is always that degree of lag. The 2014 statistics were already showing early signs of a slowdown in the continuing increase in longevity, but it was unclear in 2016 whether that slowdown was a spot issue or a trend issue and what were the underlying reasons. The consensus of opinion in the academic community and the expert community was that it was too early to judge whether longevity was peaking, but there was certainly some signs of a slowdown. But, if anything, people pointed me to single issues that might have affected it in particular years. If we are very unlucky with the flu season, it can make a material impact. That was of course well before the pandemic.
I willingly admit—and I mentioned this to the Clerk when I was invited to give evidence—that I have not been actively involved in this debate since. I am an interested observer but I have not done further research. As I understand what has happened since, whereas in the 100 years up to around 2012 or 2014, we were seeing increases of the order of three years longevity per decade, in the last decade it has more been of the order of half a year per decade. Clearly there is a difference between male and female, but I will not take the Committee’s time by going into huge differentiation.
There has been a slowing, but there is a variety of reasons why that may be the case—health reasons, for instance. Some of the benefits we have had in longevity by much improved treatment of cardiovascular diseases are beginning to thin out. There are other factors coming in. If you look at America, for example, lots of people are commenting on America’s increase in mortality, sadly. Look at drug-related deaths, and I don’t wish to overstate that but it is clearly a material factor in America.
I think we are still in the position where we know that the pace of increase is slowing but we don’t yet have enough evidence for the reasons. As I understand it, there was a marked increase in mortality in 2020, but that was not sustained in 2021, so there was an immediate pandemic effect, but I do not think any of us would wish to speculate, sadly, how those pandemic effects will continue.
From my point of view, just summing up, at the time I reported, there were beginning to be questions from eminent people like Professor Marmot that perhaps this increase in longevity wouldn’t continue at the same rate. I think there is now more evidence that that is not the case, but it remains we will only know in time.
Martin Clarke: I think John has done an excellent job of expanding on the evidence. Certainly, I do not disagree with his commentary on the experience of mortality in the intervening years since the last report was produced. On this pause in improvements, historically we would reckon that mortality was improving at a rate of about 3% per year. Over the period since that 2011-12 time, when the change in gradient appeared to start, the average improvement has been of the order of 1%, so that slowdown has continued.
I think some of the causes of that experience are as John says. It is difficult to pinpoint exactly, but there is a number of factors that have affected the experience in the UK and indeed elsewhere. Certainly, the decline in improvements in cardiovascular is a big lifestyle and medical change. That has been slightly overtaken now by dementia-related diseases, but also a lot of studies have looked at disparities between different sectors of the population and different experiences in improvements. There is evidence that a gap is widening between those areas of the population who are more affluent and those who are more socially deprived.
There has been speculation and some work around the economic impacts on health and mortality over that period plus, as John says, Covid, occasional poor winters and things like that. There is a mixture of factors that are affecting the experience and that is reflected in progressively reducing future expectations about life expectancy. The last available evidence that we had when our reviews were done the previous time was based on the 2014 population data. Now we have that based on 2020. Cohort life expectancy, which assumes future improvements in mortality, has reduced by two years over that period, so there has been quite an arrest.
I will say a couple of other things, though. The ONS projection still forecasts future improvements coming through in the longer term, so I think that is an important background. Also, some of the factors that I have skirted around in the recent experience could be put into the category of avoidable or certainly reversible in so far as they are lifestyle connected and they might be economically connected. In growing disparity, the average could improve if the bottom came up. There are some factors that are not necessarily trends that one might see continuing into the far-distant future if one took an optimistic view that these things can turn around.
There are other factors. The population of pensioners is continuing to grow and is continuing to grow in relation to those of the working-age population. The chances of reaching state pension age are continuing to increase and the expectation continues to increase that you will spend longer above state pension age. Some of these longer-term trends are still expected to be there, albeit that the recent experience has been this pause of improvements that historically—in long-term history context—is most unusual.
Q6 Sir Desmond Swayne: John, given your current status as an interested observer, as you have said, but also the experience that you had in the last review, do you still support the two principles—or certainly the main principle—that people should expect to spend a third of their life on a state pension?
John Cridland: That was one of the key pillars of Government policy when I was asked to review, and I did scratch my head as to where it had come from. Frankly, I think it is a very sensible starting point for judgments that Ministers need to make because it reflected where we had reached, largely. One can argue about whether it is 32% or 33%, but essentially in the decade running up to my review, the average over the decade was 32.87%. Clearly that was creating tensions for public expenditure, leaving aside at the moment the needs of pensioners, aspirant pensioners and people with health and other issues who don’t live long enough to get the full benefits, and just looking at the needs of society and intergenerational fairness.
When I was asked to do my review, state pension was costing 5.2% of GDP, and on the basis of the then projections of ever-longer working lives on average—not all of us having the blessing, but those who do—it would be rising over a 50-year period to 7.1% of GDP. That clearly wasn’t sustainable. There wasn’t Government policy to tackle that, because how do you tackle it? It is an enormous figure. To me, the logic of one third was this is where we are and if nothing is done, it will increase. I was incredibly sensitive and respectful in my review to the needs of people. I remember taking the civil service team to Blackpool and meeting people in their 40s who for health and employment reasons were already outside of the labour market. The idea that they may have to wait for their state pension until 68 was just incredible to them.
I think there are major issues on that 10 years’ difference in life expectancy for men—it is almost eight for women—living in the most affluent parts of society and those living in the most deprived parts. Those issues cannot be ignored and I did not ignore, but I equally accepted the logic that the state pension age would need to rise sensitively and in a staged way if it was to be affordable. That is not just an issue for your good selves; it is clearly an issue for the people you represent because of the dependency ratio of a smaller number of people in employment paying taxes and paying taxes to pay for a pension that is paid after 50 years from Government revenues. We might like it to be like a defined benefit pension scheme based on investments, but it isn’t. The argument about a third was we had been there for 10 years and it was not prudent to allow that Exchequer cost to grow in a very serious way.
Q7 Sir Desmond Swayne: Essentially you have answered the next question I was going to put to you. You referred earlier to your sensitivity about the trade union arguments for those parts of the working population that are least resourced in finding the kind of work that they would be able to continue into old age, but equally, at the same time, now we are faced with this increasing shortage in the workforce. It would have been incredible for those who had originally envisaged the state pension, this notion that a third of your life would be spent on it. I wonder if that is sustainable, even desirable. Work is good for people.
John Cridland: We work in different ways, if I may be that bold, and we could work full-time, we could work part-time. As we get older, we may wish or need to continue in paid employment, but we are looking for a different form of paid employment. Then, of course, there is our voluntary contribution. Society only works because those with a bit more time when they are retired make a huge contribution back.
One of the great learnings, probably the greatest learning, when I did my review—I had not previously got my head around it—is that, if many of us have the blessing of a parent or parents living routinely into their 90s, that means that, at a time when we are beginning to think about retirement in our 60s or late 50s, we are becoming carers, given the challenges the state faces with social care, in a way we might have thought of being carers for young children when we were trying to work in our early 30s. But suddenly we have to step out of the labour market completely in our late 50s or early 60s. If we don’t, that puts more pressure on Government spending, and if we do, it is a family contribution. There are many ways in which we can contribute.
Just to finish, and I am conscious I am going on a little, I felt there had not been anywhere near sufficient debate about how we made it possible for people in their 60s to make that ongoing contribution, without presuming it had to be of one sort, but let’s just presume we believe it is useful for as many as possible to continue in paid employment. I was quite clear that there needed to be a very significant debate with employers and with trade unions about redesigning job roles to make those job roles more possible for people to do when they are older. You do not see many production line workers in a car factory beyond 60—you just don’t. You see plenty of evidence of nurses and doctors and teachers who have a very big contribution to make—I am not talking about all of them; everybody is different—who say, “I can’t be on an A&E ward at midnight on a Saturday night at 70 in the way I was at 50”. That does not mean they cannot keep working for the NHS or the state schools or a car factory.
One of the proposals that I made was let’s focus more on the knowledge and experience that all older workers have and their role in transferring that to the next generation. I think all parties are very committed to strengthen the importance of the apprenticeship system, but the more apprentices we need, the more trainers we need. The best trainers, as in the old apprenticeship system, are people who have done it. I think we need to redesign job roles such that people can continue making a contribution, whether in paid work, caring or voluntary activity that is beneficial to society, whether taxes are paid or not.
I think it is not conceivable to think that somebody who may have health issues and may have been working since they were 16 can necessarily do so at 68. They will make a contribution and they should make a contribution, but they can’t necessarily do what they did at 50. I think that needs maturing.
Q8 Sir Desmond Swayne: Martin, you have modelled two scenarios: 32% and 33.3%. Is there anything you can tell us about what you learned from your conclusions of those two comparisons in that process?
Martin Clarke: Yes. First of all, there is no magic number that is pre-set for what the appropriate percentage may or may not be. John spoke very eloquently about the scenario in which people might be better supported to think of early retirement. I think part of my revelation during the last review was just how much of a blunt instrument the state pension age itself is and it needs to be part of a more integrated, holistic approach around this.
On those specific percentages, there were large differences between what the trigger point was for the next increase and what the increase after that might be if we wanted to keep a handle on a fixed percentage. In part, that is due to the fact that the projections that we use tend to assume future increases in life expectancy. Between the 32% and the 33.3%, you would get something approaching 11 years’ difference in the trigger point in age terms at which the next and the subsequent future increases in state pension age would need to take place to keep that ratio based on the expected proportion of adult life in retirement at that sort of level.
The conclusion is that it is very sensitive to assumptions. We can talk about very small changes in these percentages, but they do, when it interprets into the end result, cause quite big differences in their implications. One of my overall conclusions, looking at the position last time, was that this is not just a question of calculating numbers based on fixed ratios. It is important to use that sort of information as a yardstick.
It is also important to recognise that the projected life expectancy on a cohort basis stretching out into the future is not just a measure of experience, it is a measure of experience and an extrapolation into the future, which includes an element of assumption. You are pinning some of that policy framework around assumptions about the future. I think it is important to bear those contexts in mind when looking at the figures and recognise that it is useful to have these as benchmarks, but certainly not to base the whole policy entirely around one particular instrument like that and to take other factors into account in formulating policy. Some of those factors are what John has just explained.
Q9 David Linden: It is quite clear when you look at the terms of reference from 2016 and then the terms of reference set out in 2021 that the focus is undoubtedly moving away from longevity. I think it has been clear since probably 2018 that the improvements to life expectancy on which your report was based simply haven’t materialised. Does that mean the Government have changed the goalposts?
John Cridland: I clearly can’t comment on what the Government think. From my perspective, what we have seen—and I will not repeat myself—is a slowdown and it is spotty year by year. The causes need to be further explored, but it is clearly a slowdown. The implications of an ageing population, of the King sending many more thousands of congratulation letters to people who have the blessing of reaching 100, are continuing. That may continue at a slower rate, but the impact of that golden generation of people born in the 1920s and the 1930s isn’t going to go away. It is not going to reverse.
The implication is that by 2066, 2067, which is 50 years after I was reporting, we would need to spend an extra 7%—almost 8%—of GDP every single year on ageing compared with how much we spend on ageing today, two thirds of that on health and then the remainder on the state pension and adult social care. That is pretty baked in. I do not see that it will go away as a problem. The challenge that I tried to elucidate in my answer to Sir Desmond of being fair to those who are paying taxes and working to pay those pensions, but equally fair to the people who are 95 and need support or 65 and need support, doesn’t go away either. As I look at the debate, some things have changed, but the core political issues that you are asked to reach your decisions on are essentially the same.
Q10 David Linden: I would argue that pre-pandemic it was certainly quite clear that life expectancy was stalling and going into reverse. Given that we will not really have an idea of how the pandemic has affected life expectancy until the ONS releases its biennial figures next year, can we have confidence that the current review and the data underpinning are sound?
John Cridland: I wonder if that is one more for Martin.
Martin Clarke: That is a very good question in the context in which we are reviewing state pension age. It has been policy intention that changes to the state pension age will be fed in over a long period, so you are looking 10 years hence before implementing those changes. You, therefore, have this tension of whether we have enough data on which to make that decision, bearing in mind that you have to make that decision effectively a decade ahead. If you speak to an analyst like me, you will always get the answer, “Well, we could always get more data and more information,” but that comes at a price of having to delay decisions. I think there is quite a big tension there.
On the specifics of Covid, you are quite right that obviously 2020 was the big year for excess deaths but in 2021 and 2022 we have not yet re-established pre-Covid levels of mortality. There are factors that may be still related to Covid influencing that, ranging from medical factors to almost lifestyle factors as well. The story will evolve over time and in fact I suspect it is merging into other issues as well, but my general answer to this is that in policymaking, particularly where you have a long lead time, we know the data isn’t always telling the consistent story from one year to the next.
In my analysis for the last review, I pointed out some of those sensitivities around the choice of parameters and the period over which you are measuring life expectancy. I think that will continue, so the policy discussion and debate has to be around what we know now and the need to anticipate when the next decision needs to be made.
Q11 David Linden: One of the things that we know now is that in the most deprived areas of Scotland—for example, the constituency I represent—male life expectancy is 68.6 years. When the state pension age rises in the next few years, that means that men in communities like mine will, on average, spend just 1.6 years of their lives in receipt of the state pension. Can I ask you, Mr Clarke, what consideration is given to this gross unfairness when evaluating these options?
Martin Clarke: I am not the policymaker, so I do not know exactly how these factors weigh up, but it is well known that when we talk about life expectancy, we tend to talk in averages. It is very useful to understand how those averages are composed and where the differences do lie. It must, by definition, be a factor in the decision making. As I said, rather flippantly perhaps, the state pension is a blunt instrument to address some of those issues at a more granular and detailed level, but certainly it should be a factor in overall policy.
John Cridland: Might I just comment on that?
David Linden: Yes, please do.
John Cridland: To try to illustrate that, I put in my report some maps based on train lines and tubes and there was one in particular for Scotland that I have in mind. There was a 10-year difference between living in Helensburgh and Clydebank; it is the same in every city and town in England. These differences are mainly socioeconomic and they are very, very local. The conclusion I drew from that—because there was clearly an amount of debate about whether there should be differential state pension ages—was that there was a lot of merit in the proposal but it is very difficult to implement because the differences were between houses in the same street. While there was clearly a difference between Scotland and England, between Glasgow and Edinburgh, it is how many variations one would have.
The conclusion I came to was the state pension has great merit in its universality and simplicity, but that many of the issues you are rightly addressing needed desperately to be tackled through the benefits system because I was clear that there were people who wouldn’t live to get their pension. I have obviously already used the Blackpool example; it is just as relevant and very similar. There would be people who were desperately wanting to reach the state pension age because they would be better off under the state pension than under the benefits system in their 50s and early 60s. Public policy had made some improvements of a modest nature in the value of the state pension in recent years, but those had outpaced people on the benefits system.
There are things we can do and I made a number of suggestions in my report. One was that if the state pension age has to go up—if that ultimately is the Ministers’ judgment—there were a proportion of people, some of the people we are talking about, for whom that was unsustainable. One suggestion I made was that they should receive a means-tested benefit in advance of access to the state pension, so if the state pension age needed to go up to 68, there would be a new benefit for them at 67. I tried to quite clearly define who those persons were to target it on the most needy, and it was people with employability and health issues and people with caring responsibilities.
I estimated that at a cost of something like £150 million a year six years ago. You could give targeted support to the people most affected by an increase and for whom the increase was not sustainable. That was the conclusion I came to. There are very real issues that are quite difficult with the state pension age in a yes/no, single-issue way.
Q12 David Linden: Do you regret the fact that Ministers don’t seem to have given that much consideration? There doesn’t seem to be any prior interest in that proposal.
John Cridland: I was grateful that after deliberation Ministers decided that my principal recommendation was one that they would adopt. They then said it would be a matter for the next review to confirm that. In the way that Martin has said, I think that is very sensible because there are now much more up-to-date figures that are not all favourable.
On the specific proposal that I mentioned, it was always relevant to the state pension age going up to 68, so I could understand why, six years ago, Ministers would not want to be conclusive on that, but I hope it is still part of the mix because without it I felt there were people for whom state pension age going up was not reasonable.
Q13 David Linden: You spoke at the International Longevity Centre conference back in 2017 and I gather that back then you warned that the OBR forecasts that your review was based on did not take account of the unknown future impact of Brexit and reducing EU migration into the UK and how that could force the state pension age up. Given that the British Government are rumoured to be planning to greatly accelerate the rises to the state pension age, would it be your assessment that this is, at least in part, due to Brexit?
John Cridland: As Martin said, it is all dependent on the assumptions, and assumptions on migration clearly are very relevant to national productivity and, therefore, to public expenditure. It is not an area I am an expert in. I was trying then to highlight the fact that it was another variable, and if it was a variable then, it is most certainly a variable now.
Q14 David Linden: Lastly, the author of the most recent independent review, Baroness Neville-Rolfe, was promoted to Minister of State at the Cabinet Office a week after submitting her report. Do you have confidence that the second review has been carried out with the same level of independence as your own?
John Cridland: I had one meeting with the baroness at the very beginning of her tenure as independent reviewer, which was just a housekeeping meeting, a handover, what I would have done differently, how things have panned out and how she might wish to operate. Clearly, at the point of her appointment as an independent reviewer, she was entirely independent and I know no more about her report than anybody else, but I do know the right hon. Lady and her previous business background and I thought she was a good appointment. It is clearly the case, said by Government, that the report was finished and she moved on to do a different role. I can’t really go beyond on that.
David Linden: Rather rapidly and with quite a nice promotion, it has to be said. No further questions.
Q15 Debbie Abrahams: I am going to start in a similar vein to David. In my constituency in Oldham, we have a three-year life expectancy gap for women, based on the 2018-20 data, and an eight-year life expectancy gap for men, similarly reflected in healthy life expectancy. I don’t think we have talked enough about healthy life expectancy if we are expecting people to work to 68. For women, healthy life expectancy in Oldham is 58, for men it is 56, the lowest in Greater Manchester. I appreciate what Martin was saying about the data projections for life expectancy and the trend upward, but I do need to reflect back to 2017, when we started to see a levelling off of life expectancy. Some public health and statisticians suggested that this might be peak life expectancy at the time.
My question is specifically to Martin on this, but then I will ask John some questions as well. What is the sensitivity analysis in ensuring reliability of these data projections, in the scenario modelling that you and others will have done on the policy interventions that will help level off the current disgraceful gap in life expectancy and healthy life expectancy between the least and the most deprived? I didn’t mention what we know about data since 2019, which is that, for the first time, we have seen a reduction in life expectancy, which is shocking.
Martin Clarke: There is a number of points to pick up there. I will deal with healthy life expectancy first because I referenced this in my report last time in 2017. I think it is instructive because obviously the length of life that one enjoys good health is a factor and it is different from your entire life. It is also useful to bear in mind the trends of that and we have seen similar trends, as you said, in the intervening time in healthy life expectancy, so I think it informs the debate.
I said in my report last time that the basis of measuring healthy life expectancy was a little bit more subjective than obviously the rather stark basic mortality statistics. As a reliable estimate on which to base firm policy, it might not be the right time because it was still emerging in methodologies, but I certainly think it is a useful addition to the background of information on which we work.
We have talked about geographies in the disparity of life expectancy and mortality experience, and of course geography is the proxy measure for the other factors that are underlying it. Again, to build policy around geography, might be very tricky.
Debbie Abrahams: Agreed.
Martin Clarke: But I understand it is a shorthand way of describing this. I said at the start that the issues that cause those disparities are possibly the ones to focus on. The fact that there is such a wide gap between the expectation of life and healthy life between the more well off and the less well off is an issue that in certain senses lies behind the levelling-up agenda. If only we could raise everybody’s expectation of life in future to the top of that range, the average would go up. To a certain extent, what might be regarded as social issues today in future times may be a different picture where there is more uniformity and the overall average does increase.
I think these are very difficult factors to build into any long-term projection because you are speculating on what might cause those changes to take place in future. Equally, to consider that they won’t take place in future is possibly to be a little more despairing of the prospects for our advancement in society.
Q16 Debbie Abrahams: I take your points about geography, although if we look at income decile rather than deprivation decile, you will get a similar sort of thing. Are you saying that no scenario modelling has been undertaken? I think your point on levelling up is well made, but there is international evidence that should allow some modelling to be undertaken, that if levelling up is achieved there might be a reduction in the gap in life expectancy and healthy life expectancy. If there hasn’t been any scenario modelling, are you intending to do some?
Martin Clarke: The answer to that question is probably straying into what I have been asked to do this time and that remains between myself and the Department, the Secretary of State, in the work we are doing, but in the work that I have done I illustrate broad sensitivities. If life expectancy does not grow on average better than the central forecast, what would be the implications of all this? That gives you some sense of the variability. I have not done anything in the past on trying to remove some of that sort of growing disparity between the bottom and the top. Mathematically it would mean that you would be assuming a higher average rather than specifically investigating the individual deciles, but it certainly can be done.
Q17 Debbie Abrahams: John, on the point that you have made about needing to consider what happens in work, it is a very long-term project to shift the culture of work, isn’t it? We still have a presenteeism culture in the country, in spite of Covid, and even in this place we have very much an antiquated approach to work and working modes. How do we reconcile that this review is likely to suggest an increase in pension age and doesn’t at the same time recognise the disparities I have just been talking about that some people will not be able to continue to work at that age? You have said about the benefit system, but that clearly has not addressed the gap in the last five or six years since you undertook your review. For example, women born in the 1950s have been affected by the increase. These are awful cases that I get and other colleagues will get. How do we address this?
John Cridland: I think we are all in agreement that the dreadful circumstances that some people find themselves in in later life as a result of things that have or haven’t happened during their life—health, employability, education—can be, should be, must be and need to be tackled. They are essentially socioeconomic, they are very local and they need very targeted solutions. The state pension age exposes those problems, but the state pension age is an incredibly blunt instrument for tackling them. The state pension is in itself a blunt instrument and the benefits system is itself a blunt instrument, so I would not wish to pontificate about tackling those problems. There are people with expertise who could give evidence on those issues. I suggest that continuing to tackle those issues and to tackle them with more ambition and more energy and more determination is a national priority, but perhaps lies outside of this inquiry, without in any way suggesting that I am not answering your question.
You mentioned that perhaps we had not spent enough time on healthy life expectancy, as well as it being the issue for many of your constituents and Mr Linden’s constituents and others in this room. Of course, it is an issue almost for everybody, even for those who are luckier in how long they live, and luckier in the level of pension that they have. When I was doing my review, the back story was that the trajectory on life expectancy had been broadly matched by the trajectory on healthy life expectancy. The older we get, we are less likely to live healthily but the trajectories were similar. The amount of time we spent in healthy life was keeping pace with the amount of extra time we were lucky enough to live, if we were one of those lucky people.
I was not convinced that that would continue—I am now talking nationally rather than locally—because of the changing nature of health conditions. I am falling into the trap of sweeping generalisations, but we have tackled or are beginning to tackle or have made some progress in tackling some of the core issues that used to bring people down: strokes, heart disease, even cancer. Reduction in smoking, changes in patterns of drinking, all these things have had some beneficial effects.
But new challenges have come to face us. I was taken by the multiple morbidity issues, the mix of obesity, dementia, diabetes. As a non-medic, it said to me that we will have many more older people and sadly some middle-aged people who have crippling conditions that may not kill them but leave them with a quality of life that none of us would wish anybody to have and were not easy to tackle.
The health needs change. My suspicion is that in the future healthier life expectancy will not necessarily maintain the same trajectory of improvement. If the trajectory of life expectancy tails, the effect may be even greater on healthy life expectancy.
Q18 Dr Ben Spencer: In part you have already answered my core question, which was: given the change of proportion of GDP on spending on pensions predicated over the next 50 years, is that sustainable? Your answer is clearly no.
John Cridland: Indeed.
Q19 Dr Ben Spencer: Your solution to that is changes in the workforce. It builds on what Debbie was saying. How do your proposed workforce changes work in the context of what you have just been talking about—increased morbidity as people are living longer? Debbie will correct me, but while life expectancy is static or changing a bit, morbidity is not shifting that much in elder years. How will that work in your plan and what tangible policies do you think we need to bring in to move to this workforce change that we are suggesting?
John Cridland: In my overall summary, when I was trying to think of a soundbite that is consistent to what I was trying to achieve, I said we needed to do three things. We needed to be able to afford a longer life, to work longer to afford that longer living life if we were able to do so, and to be encouraged to do that, but for those who could not we needed to provide more dedicated help to them.
I think it is providing more granularity to Government strategy. Government have a strategy of encouraging people to work longer. That is part of the solution. Some will be able to do it, some will not be able to do it. We must not expect those who cannot do it to do it. I have already alluded to the fact that I do not think we have put enough attention on the increasing responsibilities for elder care that rely on children caring for their own parents. I then said that there should be statutory care leave. I also think that people should not be penalised, if they take on a caring role, for their pension entitlements. Government have tried to tackle that, but there are big issues about take-up and if many more people are doing that than are doing it now, that has implications.
One of the proposals—and how I titled it may sound flippant but I was looking for a way to get it on to the radar screen—was that I called for a midlife MOT. We get a letter or an email from our doctor when we are 50 that just takes 50 as a proxy for, “You might want to come in and have a health check”, but I was arguing for a lifestyle check, not just on finances. Government have responded to that with people need to think about what their pension will be and they need to get more advice on whether it will be adequate so they do not walk into a problem.
For me it was: what do I want to do and what am I likely to need to do in my later years—caring responsibilities, voluntary contributions, plans with my work? What implications does that have for how much money I need, and what options do I have while I still have time to do something about it to match my needs with my income? I think that would encourage, and it does not need to be a nanny state. It could be a digitally enabled, web-available tool to get many more people to think about these things in the way that school leavers and university leavers do. There is a trigger point; you think about what you are going to do with your life. Increasingly, if, in your late 50s, as Sir Desmond said, you have another third of your adult life ahead of you, it is another milestone for thinking, “I do not just want to drift through these next few years”. That was part of it.
I think there is a huge responsibility on employers to step up to the plate in the way that they had to in the last part of the previous century with maternity and paternity. There was a time when it was typically working mothers—it could be working fathers—stopped work to look after children and then we realised it was perfectly possible, with a bit of give and take on each side, for people to be able to work and bring up children. I think we will face the same thing with elder care responsibilities. Employers must get their head round that.
Maybe somebody needs to step out for two years or five years and then come back. Maybe they need to work two days a week rather than five days a week. Even if they do not have caring responsibilities—I do not want to repeat what I said earlier—it is quite hard to envisage on average a 68-year-old nurse in A&E at midnight, but that does not mean that person could not be providing a credible contribution to the health service: coaching, training, supervising, monitoring, playing lots of other roles. I do not think many in private sector or public sector organisations have yet got their head around how job roles can be redesigned to focus on the productivity that comes from what is in people’s heads rather than their knees.
Q20 Dr Ben Spencer: Do you think we have a cultural issue with older people in the workforce who have a lot of experience and expertise and wisdom, passing that on to younger generations? I am thinking of other cultures and I should declare my vice-chairmanship of the APPG on Japan. In the Japanese culture there is a whole cultural set-up where people are seen as experts as they put in the hours and the work, but they can go into their later years and there is a great reverence and they form an important part of the workforce in apprenticeship and training. That same sort of thing does not seem to apply in the UK. Do you agree with that?
John Cridland: I agree with that and I agree that it is cultural. I think some progress has been made. There is less—I do not claim no—discrimination against older workers in their current employment, but the evidence bears out that if you are an older worker trying to get a new job, perhaps one of my carers who has gone out and now needs to come back because of affordability reasons, it is still very difficult to re-enter the labour market. We make progress but nowhere near sufficient.
Q21 Dr Ben Spencer: How would you shift that around? I am putting you on the spot—I realise that is a difficult question.
John Cridland: I will not repeat some of the points I made in my report. For a report that was meant to be about the state pension age, I think Ministers felt I had cast the runes quite widely because I felt these wider issues were highly relevant to getting the balance right. Cultural change in the world of work takes a long time but there is plenty of evidence. As we have seen with discrimination against working mothers, these things can be improved over time. It is almost generational and I think now we need to focus. If the population is getting older, perhaps the focus of cultural change needs to be where you suggested it should be.
Dr Ben Spencer: We probably need to get on to this because the population over the age of 55 who have left work because of Covid have to come back, haven’t they? It is still within what is deemed a working age group—we have a problem in terms of getting them back into the workforce.
Q22 Steve McCabe: I think my questions are mainly for Mr Cridland, but if you want to add anything, Mr Clarke, please do. I want to ask about the triple lock. This Committee said in its recent report “Saving for later life” that we should retain the triple lock because of the significance of the state pension in many people’s overall income, although you may recollect that an earlier version of this Committee took a different view. As far as I know, you recommended, Mr Cridland, that we should probably get rid of the triple lock. I presume that was largely on cost grounds. Has anything happened to change your view of that?
John Cridland: No. It was not the primary purpose of my report. The reason I commented on it is exactly as you say. There were voices off who felt that the move from 67 to 68 needed to be much sooner, and, indeed, that 68 should not be the stopping point. For all the reasons that we have discussed, I felt that there was a limit to how far one could bring forward a pension increase, an age increase, to 68. I could not, in good conscience, recommend doing that before 2037 to 2039, which was earlier than the previous policy position of 2044 to 2046 because that had been overtaken by longevity increases. But for all the reasons said, which I will not repeat, I felt that is as far as I could go.
We are left with the affordability question, which is a quite legitimate question. I made a bold statement in my report, which I stand by. If there were those in Government who felt the pension age increase needed to come earlier or go further, the triple lock could not be sacrosanct. The triple lock had to be looked at because many of constituents that you have referred to me want their pension. Yes, they want their pension to be as valuable as it could be but they want to live long enough to get their pension. Having the triple lock as a given but endlessly having to push up the state pension age does not necessarily serve all the pensioners.
I also, without getting too much into detail here, referred to the fact that the triple lock had undone much of the damage done by removing the earnings link in the state pension in 1979. I will not get the figures absolutely right and Martin may wish to correct me. If memory serves me right, in 1979 the state pension was worth about 26% of average earnings. By 2010 that had fallen to 16%. When I reported, it was back up to 24% and I suspect it has gone a little bit higher since. In a sense, the original mission of restoring the earnings link had been achieved.
I was projecting forward to 2066-67, a 50-year forward projection. If the triple lock remained for those 50 years, which is not necessarily what people are suggesting, it would cost an extra 0.9% of GDP. All I was saying was that if there is continuing pressure on the state pension age, accessibility to the pension, which is that issue, needs to be taken into account as well as the value of the pension. Don’t forget I was talking about the late 2030s where we were heading for that trade-off. My judgment was I was not prepared to recommend a higher or earlier state pension age than 68 by 2039 if the triple lock remained as it was because I did not think it was a fair paying share. I hope I have made myself clear.
Q23 Steve McCabe: That was very helpful, thank you. Mr Clarke, obviously this is something that some Government Minister—some Chancellor, I suspect—will have to address sooner rather than later. What is your own take? Can we afford to retain the triple lock?
Martin Clarke: I think John has expressed the connection between the age at which your pension starts and the fact that it has what some may see as a generous future increase escalation. Stepping back a little, and looking at some of the things we have touched on already, I have referred to the fact that the population of pensioners is growing, the proportion of people in pension is growing. These factors contribute to this rise, as has been mentioned, in the share of our national income GDP that is being allocated to paying pensions.
Increase in longevity contributes to it as well. This pensioner population is growing, people are living longer, but on top of that they are also getting a triple lock pension increase. As you know, it is the greatest affected of three indices and, therefore, over a long period it will outstrip any of those three indices. All this is adding to the affordability issues.
The state pension age increases in future—obviously pushed back slightly in the opposite direction—but in long-term analysis and modelling that I do in connection with the National Insurance Fund, those projected or forecast increases only make slight adjustments to the long-term trend. In themselves, they do not cure the increasing pension population; that still goes on. They provide a small break to that growth in expenditure, growth in pensioner population, but they are not in themselves the way of meeting that growth.
I think you have things pushing in different directions. Future policy on state pension age is a way of slowing some of it down but it does not stop it completely. I think sometimes that gets slightly overlooked in this kind of debate: we are dealing with this huge bulge in the pensioner population, which is putting pressure on Government finances and raises this question of affordability. These are very difficult questions to address and balances to strike.
Q24 Steve McCabe: I do not know if the Chancellor or the Work and Pensions Secretary asked you, but if he did, what would you recommend?
Martin Clarke: In what sense?
Steve McCabe: Retention of the triple lock.
Martin Clarke: I think that is a hypothetical question.
Q25 Steve McCabe: It was worth a try. Let me ask you something else. You talked about access to the state pension age. Does it remain your view that the age should be universal? Other groups—Age Concern is one that I can think of—have talked about maybe earlier access for people in receipt of disability benefits or carers benefits. What is your own take on this? Should it remain a single age of entry?
John Cridland: I failed to come up with a workable model for differential state pension ages. If somebody could find a workable model, that should clearly be looked at. I scratched my head very hard but because of the nature of the socioeconomic reasons, constituency differences, street by street differences, it is very hard to provide a targeted approach. I believe there are some merits on the other side of the balance sheet in a universal access to a state pension at the same age.
Means-tested benefits bring lots and lots of disadvantages, and differential benefits bring lots and lots of disadvantages. From an early age it is something that people know they have an entitlement to. Look how controversial changing the date at which you can get it has been, never mind varying it by constituencies. I do not mean parliamentary constituencies, but constituencies of individuals.
I repeat what I said earlier. I felt that we had to help those individuals for whom this was demonstrably unfair, but there were more effective ways to do that through the benefit system. Arguing that somebody should get a means-tested benefit a year earlier than their state pension age is another way of saying they get the state pension a year earlier but it is a targeted—
Q26 Steve McCabe: Is that why you recommended pension credit should be available earlier?
John Cridland: Yes, exactly. Doing it through the benefit system allowed more effective targeting, in my judgment, than varying the age, which I felt was a very blunt instrument.
Q27 Steve McCabe: You recommended access to pension credit a year earlier. Some of the groups—TUC, the National Pensioners Convention—wanted it a bit earlier than that again. Why did you settle for one year?
John Cridland: I had already ranged quite broadly in my report and, without wishing in any way to sound flippant, I had been asked to address one question: at what date should the increase from 67 to 68 take place? I think those representations are well worth considering but my issue was how did I help the people who I suggested would have to get to 68 to get their pension. How did I help those for whom that would be unbearable? For me it was a one-year issue because Government said, “Do not revisit 67, tell us about 68”. For me it was that 12 months and there was a group whom I said would need a means-testing benefit, if pension credit was then the benefit, a year earlier.
Q28 Steve McCabe: If the question was put to in a slightly different form, you would have some sympathy with the National Pensioners Convention or the TUC’s proposals.
John Cridland: I have not done the homework but I would certainly wish to do the homework.
Steve McCabe: I think that is clear as well, thank you. Do you have anything you want to add?
Martin Clarke: It is not my area of expertise, I am afraid.
Q29 Chair: Mr Clarke, can I put a couple of points to you? As you have reminded us, you produced a report last time around in parallel with John Cridland’s report, and that was published well before the Government’s decision. This time you have produced a report, which I think the Government received in October. Was that when you presented the report? I think that has been said publicly. But sadly, and regrettably I think from our point of view, that has not been published this time, so we have no idea what is in it. Are you able to shed any light on what the Government asked you to look at this time around?
Martin Clarke: The short answer to that is no. The circumstances are there is a professional adviser to Government and for this particular purpose the client is the Secretary of State. I have a responsibility to the client. The product of my work, and indeed the terms on which it is being done, are effectively their property. It is entirely up to them to determine how that is dealt with. It is not something that I regard as within my gift or within the terms of engagement that I have with my clients.
Q30 Chair: I completely understand that. I think you will understand from the Committee’s point of view that it is disappointing we are not able to see the evidence this time around but I take the point it is certainly not your responsibility that we cannot.
I will put another point to you. A former Pensions Minister, Sir Steve Webb, said that the 2020 ONS projections justify “a fundamental rethink of the timetable for increasing state pension ages”, starting with the timetable for the increase to 67. Do you think he has a point?
Martin Clarke: Again, without talking specifics about this time’s review, I think it is fair to say, as I said in the opening remarks, that the life expectancy under the most recent measures has reduced compared with what was current at the time of the previous review. The background, as we have covered this morning, to this particular review is one of some sort of uncertainty in the long-term trends of mortality improvements but also a certain levelling-off or retrenchment in the experience that we have seen today. That is well known and it is obviously a factor that will have to be taken into account in any consideration.
Other factors, as we have covered again this morning, are the affordability question, which continues to raise concerns. I do not want to address specifically Steve’s particular challenge, but I think it is reasonable to assume that this is all a background to the decision making and thinking that is going on at the moment.
Q31 Chair: The striking point he makes is that we ought to be having another think, not just about when the age goes from 67 to 68 but whether it should go up to 67 on the current timetable. From your analysis of the data, does he have a point there about the 66 to 67 change?
Martin Clarke: I have to be careful about revealing what has been done. I do not know the basis on which he has done those measures so, in fairness, I cannot comment in any detail. In practice, the calculations or the advice that I have written in my report, as we have covered, is in the gift of Ministers to disclose.
Chair: Thank you both very much for very helpful and useful evidence. We are grateful to you. Thank you for joining us. If I could ask you to step down from the table and we will welcome our second panel this morning, whom I invite to take their places at the table.
Examination of witnesses
Witnesses: Sally West, Jack Jones, Professor Hilary Land and Professor Les Mayhew.
Q32 Chair: Thank you all for joining us. I think you all heard some at least of the previous panel, so thank you for being present for that discussion as well. Can I invite you all, as I invited the previous panel, very briefly to tell the Committee who you are for the record?
Sally West: I am Sally West. I am policy manager at Age UK.
Professor Land: I am Hilary Land, retired professor of family policy from the University of Bristol. I have also been a long-standing member of the Women’s Budget Group, on the management committee and also part of the policy advisory group.
Professor Mayhew: I am Les Mayhew. I am professor of statistics in the faculty of actuarial science at Bayes Business School and a long-term associate with the International Longevity Centre UK.
Jack Jones: I am Jack Jones, policy officer of the Trade Union Congress, responsible for our work on pensions.
Q33 Chair: I will start by raising with you the process issue that I raised last time. As we discussed, in the last review six years ago John Cridland’s interim and final reports and the Government’s own review were published several months apart. This time it is all being kept under wraps until the Government announce their decision. Do you think the former, more open approach worked better and, in the current work, are the Government talking to you about these issues ahead of the publication of their decision? I am interested and I will start with you, Sally.
Sally West: I am happy to start on that one, particularly because I have been at Age UK some time so I was involved in the previous review feeding into the work of John Cridland. I think that approach worked well. He talked about the interim report, and you will be aware that it was a very detailed report of the evidence and with a lot of broad questions for organisations and others to respond to it. It was very useful having that report, thinking about state pension age but also broadly the pension landscape because it looked at different generations and the prospects of retirement. Then, as you discussed earlier, we had the GAD report and John Cridland’s final report, and then a gap before we had the Government response. Again, although there was no formal consultation on those, there was the opportunity for people to put in their comments on the two reports.
As you know, it has been a very different process. We were invited to give evidence to the independent review. Baroness Neville-Rolfe talked to organisations, invited comments, but I think the remit that she had was narrower than for the first report because it was focusing on metrics whereas John Cridland, as he said himself, looked at the issues widely. It is perhaps disappointing that there has not been the debate there was last time, for organisations like ours but also for the wider public and in Parliament.
Q34 Chair: It seems that the Government will announce their decision fairly soon, possibly at the Budget but we don’t know for sure. Are they talking to you about these matters at the moment?
Sally West: We have not had any formal approaches to make our views. We have contact with civil servants and Ministers but there has not been a come and give us the evidence. Organisations like ours are large and we are able to get our views across and we produce reports. We have made attempts to get our views across, but perhaps some of the smaller organisations or the public have not had the opportunity to feed in. No, there has not been a formal approach to ask us to respond with a view.
Q35 Chair: Thank you, that is very helpful. Do any of the other witnesses have comments on differences between how it has been done this time compared to last time?
Jack Jones: I was not around last time but I can say we had a very similar experience to Sally with our engagement initially with the independent review, and subsequently we have not had much engagement or any engagement with DWP. We share concerns that were made by the Committee or members of the Committee about the impact of that lack of transparency and scrutiny on policymaking and also the lack of public debate that it has allowed around what is a very significant issue that will affect a lot of people, particularly as it seems likely we will move away from this established one third of your adult life and retirement principle.
It is compounded by concerns we have about the independence of the review as well, given that its author was an ex-Government Minister who became a Government Minister again very shortly after completing the report. I think when you add those concerns about independence to concerns about transparency, it starts to look a bit like a potential stitch-up.
Professor Mayhew: I think I see things slightly differently. A lot of the things that were around, as we heard from John Cridland, are still around today and it probably is usually not worth reinvestigating things that have not changed. I think the emphasis this time is more on the metrics of the state pension age and how fast and how far it should go in the light of what we have seen during the pandemic and other things.
With my involvement or consultation, I gave a webinar on my work about a year ago, ahead of the review, which Neville-Rolfe attended or was in the audience, but I do not recall her asking any questions. I have been contacted by an analytical team in one of the Government Departments—not Martin’s—about my methodology and approach. I feel that I have had some engagement and also my International Longevity Centre, which I am representing here today.
Chair: Is that engagement with the DWP?
Professor Mayhew: It was, yes, on an analytical level, not on a policy level.
Professor Land: I think that any uncertainty around the right raising of pension age is very important, as has already been said this morning, in the whole issue of social care and social care policy. That is certainly in crisis. I think everyone recognises at the moment that the social care service is even more problematic, in some ways, than the problems facing the NHS in keeping staff and recruiting staff. It is helpful to be as transparent as possible about key issues like how long you are expected to work when we have already heard this morning that there are real issues facing the paid care workforce as well as family carers of all ages.
Q36 David Linden: I want to ask a few questions specifically on the impact of increases. Professor Land, I am thinking specifically of the experience of previous increases to the state pension age, specifically of the 1950s women. What lessons should the British Government draw from the experience of increases to the state pension age today?
Professor Land: One of the things that has to be noted is that the big group of carers, and particularly women, occur between the ages of 50 and 64. Of course they have been the ones who have had to cope with working longer to get their pension. The issue that was already raised this morning about the huge gap in healthy life expectancies between people living in the poorest districts and those living in the richest has made big problems for those people, particularly women. One in four women and one in seven men aged between 50 and 64 are carers. They have found it very difficult because we do not have in place what employers can do to support their employees if they are trying to combine paid work and caring.
We recognised, at least up to a point for motherhood, the impact that has on the ability of people—particularly women but fathers, too, later—to work without any kind of paid leave or reduced hours and so on. We have got a long way with that, but we still do not recognise what is happening particularly to poorer older women who themselves are often in poor health, and combining paid work and care is a real problem. I think that there is a responsibility not just for state policies but for employers to recognise their problems and think about ways of dealing with that.
Q37 David Linden: That is very helpful, thank you. Being particularly mindful of the ongoing ombudsman inquiry for 1950s women and the issues that were found with DWP malpractice—there have been issues with communication—do you think that the British Government are getting better at communicating to people what they can expect from their state pension?
Professor Land: As I say, what concerns me is that they are not transparent enough about how far they recognise the consequences of raising state pension age and the impact this will have particularly on women, but increasingly men too, and the huge inequalities between the experiences of men and women who are poor and others who have a choice about whether or not they continue in paid employment, and some do take early retirement. It is a lifestyle choice, but I do not think that is true for a lot of people.
Q38 David Linden: Mr Jones from TUC, can you outline a bit more about the reasons that people are unable to work to pension age?
Jack Jones: That varies quite a lot by region, by occupation, by ethnicity. We do quite a bit of labour market analysis looking at reasons for people leaving the labour market in the state pension age, so it tends to be working over 50 or working over 60, depending what data we are looking at. The big drivers obviously are retirement for a lot of people over 60, ill health and caring responsibilities. Between them, those three categories cover about 90% of people who are leaving the labour market before they reach state pension age. There are big differences in the split between those three, depending on where you are in the country or what kind of job you were doing before you became economically inactive.
We see much higher rates of inactivity because of ill health in Northern Ireland and Wales, and above average in Scotland and north-east and north-west, in Yorkshire and Humberside. We see some interesting numbers around BME people, where BME men in particular are much more likely to stay active until state pension age, which is probably largely reflected in the fact that they are less likely to have built up enough occupational pension or personal pension to be able to retire.
When you look at the reasons for inactivity, again you are much more likely to be in health or caring. Obviously caring responsibilities is a gendered subject but it is even more pronounced when you look at BME women who are economically inactive. BME women are twice as likely as white women to be inactive because of caring responsibilities.
Probably the biggest dividing line is looking at occupation where people from generally low-paid sectors, like security guards, cleaners, retail, the caring profession, are much more likely to be economically inactive because of ill health than those coming from higher-paid professions. It is also people who are in manually intensive or physically difficult jobs like people who work with machinery. Those are the main kinds of differences we see in who is being forced out of the labour market for different reasons.
Q39 David Linden: A question to Ms West. On the impact of raising the state pension age on future retirement incomes, I was interested in a report that Age UK produced in January, I think it was. There is a quote in it saying the pensioners will “likely be condemned to penny-pinching retirements because the money they had saved to help bolster their incomes will have been spent.” Can you develop a little bit more on that and the impact that that has?
Sally West: We talked in the earlier session looking a lot at the numbers and we thought it would be useful to be doing something, looking at what this means for the individuals and the groups that others have been talking about—carers, disabled people and long-term unemployed who cannot find jobs. Our report was based on interviews and also many comments that we have received from people in their 50s and 60s.
I think there are three things. There are people who have very little other income; as you know, carers get under £70 a week as a benefit from the carers allowance and many people feel their work or their care is very unrecognised. On people living on low income, people talked about having to go to food banks, relying on charity, at the time when you are providing a lot of hours care for the person that you love and yet are put in financial difficulties because of it. Other people perhaps leave work in their 50s or early 60s and find they are using up their own retirement savings, so they cannot claim additional benefits because they have a bit in the way of savings.
I remember one woman who is in our report saying that by the time she gets to state pension age she does not think she will have anything left and, “What do I do about paying for my own care there?” It is a very similar situation for people who have to leave work because of health issues. There is the example of a woman who said she had worked for 40 years as a care assistant, working nights, that had obviously taken a toll on her body. She had had to leave work at 60, and she is now 63 with another three years to go. She says she is living on a work pension, which is under £300 a month, drawing on her savings and she says—I wrote down—"This has been a miserable time in my life, not even got a bus pass to visit family and friends”. We have heard a lot of stories like that of people who are struggling financially.
The other one that Hilary talked about is trying to combine work and care or trying to work when you feel like you should not be working. Particularly people who have been in manual jobs, heavy physical jobs all their lives quite often say that the people who make these decisions work in offices, pen-pushers as they are sometimes still called. They do not understand what it is like to work on a building site for 40 years.
Finally, there is the example of somebody who is providing care for her 94 year-old mother and combining it with work who just said to us she does not have time to think about herself. She is just working and providing care. She said she felt utterly devastated, depressed and exhausted. Those are just some of the examples. I could talk about this quite a long time but I will stop.
Q40 David Linden: The UK has one of the worst state pensions in Europe. The number of situations that you outlined there are particular distressing. We are the sixth largest economy in the world yet, as you have discussed, many pensioners are finding it intolerable in retirement. What does that say about the UK and our current pensions system? Is the current pension system in the UK broken?
Sally West: I think it is about having a pension system, and the people I am talking about are people who are under pension age, specifically the people who are particularly affected by the rises in women’s state pension age. Something that perhaps gets less attention is the rises in pension credit and means-tested benefits. In 2010, as everybody knows, women could get a pension at 60, but also both men and women could get pension credit at 60. I think it is those two policies, the reduction in not being able to get the more generous means-tested benefits as well as not being able to get the state pension until 66 now and potentially going up further.
I think we need to be giving more support, and clearly there are older pensioners who need support, but also thinking about this group of people who are approaching state pension age. You talked a lot in the earlier session about the disparities with healthy life expectancy and we feel that people in this situation need more support to enable them to reach state pension age in a reasonable financial and health situation.
Q41 Debbie Abrahams: I am conscious that about 43% of the DWP budget is on state pension at the moment. That is set to increase, as you probably heard in the previous session. Currently the state pension is rising from 4.8% of GPD in 2021-22 to 8.1% in 2071-72. Given that we are an ageing society, do you want to comment on what this means about the affordability of the state pension as it stands? Hilary, you put your hand up first. Do you want to start and then we will go on to Les?
Professor Land: I think that we need to understand that if we don’t look at what men and women—particularly in the run-up to the pension, and particularly women who, as you have said, have had this huge increase in their pension age. What happens if we don’t take social care, whether it is in the paid workforce or family carers, more seriously than we do at the moment? The ONS produced some figures about five years ago, based on the 2011 census, which said that if we did not have these over 5 million unpaid carers we would have to increase the paid social care workforce four times—fourfold. That seems to me a very good example of how what they do is taken for granted.
We have already mentioned the very low carer’s allowance, but it is interesting that although 1.3 million carers are entitled to it—they claim it—nearly 30% do not get the full payment or any payment at all because of the way it interacts with other people in the household. It does not just depend on their individual income. It depends on other people’s income, too. There are over 300,000 carers who are entitled to carer’s allowance but are not actually receiving it, so that needs to be looked into. If we are going to stick with the state pension age going up, we have to look much more carefully at that.
One of the interesting figures was produced by the ONS recently when it was looking at economic inactivity and the reasons for it. It did a study that asked people, “Were you economically inactive before you became economically inactive because of ill health?” and 69% of them had been economically inactive before but for a different reason. The most common reason was they had been involved with family care. Something like 185,000 of those currently economically inactive because of ill health had previously been economically inactive because of caring, and it seems to me that that is something we should recognise. It isn’t just the person being cared for who may be in poor health. It is also the person providing care, and that is particularly the case among poorer families.
Professor Mayhew: I agree with everything Hilary said, but I don’t think the solution is varying the state pension age up or down. It will not address the deeper problems that start earlier in life. It is also important to remember that we have a multi-pillar pension system involving occupational, private and other pensions that do quite a good job. They are doing a better job and they can be taken at a much earlier age, from age 55. I agree that they might not be enough to sustain you but they have an effect of smoothing out income deficiencies over time.
That leaves behind this group of people that you were talking about, Hilary, who have not had any ability or means to save for old age because of other responsibilities. In those cases, we need to fix those particular problems and we can fix them in different ways. We can fix them through being more creative with our other pillars in the pension system and we can fix them by being more creative with the benefit system, but I don’t think it makes a jot of difference whether you raise the pension age by one year or you lower the pension age by one year. It will make hardly any difference to these deeper issues.
Jack Jones: I agree with Les on some of those points. I think that we need to think of the state pension as part of a wider system and we need to start by recognising that state pensions are really expensive. Also, there is almost universal agreement that it is an essential thing for Government to provide. Therefore, we probably need to have a conversation about what do we want from the state pension—which is a surprisingly difficult conversation occasionally—and then work back from there. I think a lot of people would have the starting point of it should keep people out of poverty in old age.
Professor Mayhew: It is more like a universal income but not sufficient to live on. It is a boost to your circumstances at a point in time. It is also extremely expensive and will become ever more expensive, so we need to recognise that if we spend more on the state pension, we spend less on other things like social care, education and healthcare. It is a dynamic system. You cannot look at these things independently of other pressures on public spending.
Jack Jones: One of the most eye-catching announcements from the impact of the increase in state pension age to 66 was the IFS work, which found that for 65-year-olds it meant we saw poverty levels go from one in 10 to one in four. That suggested that there is a group that is being failed. The state pension is not doing what we want it to do there. Yes, we cannot think of it in isolation, the level of state pension and state pension age, but I think we need to be careful about looking for false economies, trying to save money on the state pension age.
Q42 Debbie Abrahams: Is there anything you want to add, Sally?
Sally West: We need to be careful not to think about once you get to your state pension, once you get to retire, that you are no longer contributing. We talked about perhaps there being more that we can do to help people work longer, after state pension age but also those who are out of work in their 50s to state pension age.
We talked about carers quite a lot, which is clearly a very valuable economic contribution to the country, providing childcare to enable younger family members to go out to work, and the backbone of the voluntary and community society. Therefore, we need to think about the contribution that older people make in other ways.
Q43 Debbie Abrahams: That is a very important point. Could I have one-sentence responses to what you heard John Cridland say about the triple lock not being sustainable in the future?
Sally West: We are concerned about people on low lifetime and modest lifetime incomes. For them it is both the level of pension and when you get your state pension. There is no point waiting a long time for a much better pension, because your life expectancy means you may not benefit. Similarly, if you get your pension a bit earlier but it is not enough to live on. There perhaps needs to be some expectation that we spend more of our GDP on issues such as pensions, because we are relatively low compared with other OECD countries. To us it is not a trade-off because they are both really important for the groups that rely on the state pension most.
Debbie Abrahams: Again, one sentence answers, if I can encourage you.
Professor Land: I agree with Sally. We should find a way of keeping it affordable. I mean keeping the triple lock and spending more if we have to.
Professor Mayhew: I am all in favour of keeping the value of the state pension and, through whatever means, linking it to salaries and wages. I remember the bad old days when it wasn’t and what happened then. Changing the pension age is a way of making the triple lock more affordable going forward, dealing with inflation and things like that. I can expand on that but you wanted only one sentence and got about three instead.
Jack Jones: One sentence and many pauses. Given the levels of pension poverty we saw in the 1970s, I think we need to aim higher than the 1970s and compare ourselves to similar countries where we generally see higher state pensions, in a different system but which results in significantly less old age inequality and old age poverty.
Debbie Abrahams: Fantastic. Thank you very much, everyone.
Q44 Sir Desmond Swayne: Given the principle that was established by the coalition Government that one should expect to spend a third of your life on the state pension, what additional principles do you think should be added to that principle? Let’s go from the left across.
Jack Jones: The thing that that misses mostly is the inequalities of life expectancy and the growing gap between people from the most deprived and the least deprived areas. We have some issues with the whole idea of having a mechanistic process that says, “We have a formula that says you will spend a third of your adult life in retirement. We will put it into numbers and it will give us the answer on what the state pension age will be”, because it obscures what is fundamentally a political question and makes it look like a tactical question.
One of the things is recognising that, at the end of the day, the state pension age is a political decision rather than necessarily the result of a formula. We know that the answer you get can be tweaked by varying the input, by changing the parameters and a recognition of that would be significant.
If we are going to stick to something that says we have a formula for the state pension age, we should think about whether we can link that to life expectancy in the most deprived areas rather than on an average. That would be quite a good way of almost saying to the Government, “Put your money where your mouth is on levelling up”. That would be the proof of policies there. Also, it would be a way of taking into account that, if you just take an average, you are potentially going to be moving the state pension beyond the reach of lots of people in lots of areas.
Q45 Sir Desmond Swayne: The level would certainly go very much further up for those in prosperous areas, wouldn’t it, though? They would get a huge bonus out of that one.
Jack Jones: If you are concerned about people on high incomes in old age, you can probably address that through the tax system.
Professor Mayhew: I looked at four ways—four metrics—one of which was the one-third, two-thirds approach. I also looked at constant expectation of life on reaching state pension age, a constant support ratio between the population above and below state pension age. That is more like what is known as the PAYG, pay as you go principle—today’s taxpayers supporting today’s pensioners.
I also looked at a constant proportion of the population surviving to state pension age. That may have been mentioned by Martin or John. Currently, about 85% of the population survive to get their state pension, 15% don’t. As life expectancy increases, obviously the age at which that occurs can go up so I looked at that as well. I looked at the cost projections of each of those and also the age at which pension age should change to reflect those different principles. I can go into detail on each of those briefly if you are interested in that.
Very briefly, ensuring that future generations have the same number of years ahead of them would mean a state pension age increasing to 68 by 2041, two to four years earlier than currently projected. Keeping the support ratio constant, the PAYG principle, is quite tight. It would mean raising the state pension age to 68 by 2031 and 70 by 2040. That timetable could be slowed down if you were able to get more people who are inactive economically active, back into work. I can elaborate on that separately if you are interested.
Spending one third of adult life in retirement, which you have talked about a few times, is quite interesting because that has the slowest rate of increase. In fact, you would not need to raise it to 67 until about 2040, which chimes with the point that someone else made—I think Steve Webb possibly—and you also referred to it.
Maintaining the proportion of the population living up to and beyond pensionable age is currently 85%, 86%. That would cause the state pension age to reach 68 by 2032 and age 70 by 2042. Needless to say, some of those methods have much cheaper cost trajectories than others. Of the most expensive, the one-third, two-thirds rule is by far the most expensive. The PAYG principle is the least expensive of those, but there are things you can mitigate to reach some sort of compromise between all those different methods.
Professor Land: I don’t find it very helpful just to think about that sort of formula, because it seems to me it avoids a whole lot of issues. As some of us have already said, it is actually more important that we make the possibility of a longer working life easier for people. That is not just because they themselves might not be in good health but also if they have caring responsibilities, so that when you are working from your 50s into your 60s it is important that your other responsibilities—as granny you are helping with childcare or you are looking after a partner who is ill or you may well have an older relative who is ill. If employers and the state made it easier to combine paid employment with care in particular, in a sense those kinds of formulas would be less important or less relevant.
It seems to me that it is much more important to look at the working population and how we can be sure that they can go on working until the pension age, taking into account their responsibilities. Things that we are yet to have, like paid leave if you have caring responsibilities, are very important. When employers became responsible for a while following Barbara Castle in the 1970s, maternity pay was paid for by operating a levy on the bigger employers, which was put into a fund. That meant that smaller employers could also afford to pay I think it was six weeks’ maternity pay. For apprenticeships we use a levy on the big employers to pay for apprenticeships. I don’t see why we could not have a system to fund carers’ paid leave in a similar way of having this broad levy that you can then use so that it is easier for them to stay in employment and also look after people when it is needed.
If that had been in place, it might have helped a bit more when discharging people from hospital. There is an opportunity cost involved if you don’t recognise the caring responsibilities particularly of those who are in paid employment and having to combine the two. For me, those are the issues around pension policy and state pension policies. Rather than whether we have a formula saying one third of your life could be spent living on a pension and at retirement age, I would rather look at how do we live our lives combining things like care and employment?
I think it was said earlier this morning about the whole issue of having a sort of MOT in your 50s to see how your skills and experience could be used, so that you are not regarded as someone who is heading for retirement and that is the end of it—“We don’t need to bother with you anymore”—but we go on investing in skills and training as well as using the older experienced people to train younger ones coming along. That is where I would focus policies rather than use some formula, which I find in the light of the life expectancy inequalities irrelevant almost—well, not helpful anyway.
Sally West: I will be quite quick. Yes, I agree with a lot of that, but I suppose, given that we have a single state pension age, having a broad benchmark of a third of life in retirement makes sense. Within that, perhaps the issue of addressing the issue of inequalities is important because it is a third for somebody with an average life expectancy.
We have already talked a lot about those who are not fortunate enough to be in that position, so I think it is about addressing those inequalities that social security systems can help mitigate but, of course, it is much wider. It is health and education and a lot of other areas, but that seems to me to be very important.
Jack Jones: Can I come in quickly with two other points? I was thinking that the two other principles that are very important are that you have sufficient notice before making changes and the linked principle that you want—
Q46 Sir Desmond Swayne: Is the 10 years enough, which is the current—
Jack Jones: Potentially not, but it is important that it is recognised that you do need to give sufficient notice. Also, a linked point, you need a degree of stability as well. Even if you are giving 10 years’ notice, it is not particularly helpful if you have a system where potentially we are significantly changing that timetable every six years. Those are two quite important principles to include.
Sally West: Can I come in on the 10 years’ notice? I think it is important that that is an absolute minimum—that by 10 years it is not a Government Minister standing up and saying the state pension age is going to go up. It is obviously the debates in Parliament, but people being notified, people being told individually by the DWP and also the regular checks that people have received those communications and understood them. We know from the parliamentary ombudsman there were issues around communications.
Perhaps linked to that there is more that could be done to tell people regularly not just the bad news that, “Your state pension age is going up”, but confirming, “Nothing is going to happen in the next 10 years. You can now be confident that your state pension age is this age. This is how you can get your state pension forecast.” In the interviews that we carried out with people in their 50s and 60s, they did not have much understanding of the state pension, partly because they were too worried to find out because they did not think there was anything they could do about it and they did not know much about it. They all thought the state pension age was somewhere in the region of 66 but they did not know precisely.
There was a lot of mistrust in Government and more generally. They felt, “What is the point? The Government are probably going to move the goalposts again.” One thing that the changes in the women’s state pension age have done is give people less confidence that what they expected to be there when they got to state pension age will be there. I think there is quite a job to be done in reassurance and telling people, “Don’t worry. We have a policy. We are not going to be changing this. This is when you can expect to retire.”
Q47 Selaine Saxby: Good morning. My apologies if we have already covered any of these points. I was slightly late in. What implications do you feel the latest life expectancy projections have on the timetable for the future state pension age?
Professor Mayhew: The results I just quoted were based on the data available at the time I did the work in 2018, so slightly pre-pandemic, and obviously the pandemic has caused the period of life expectancy to decline. We heard this morning that it is getting back on track. It will continue to increase but it has not been talked about as much. I think the bigger problem is the sheer weight of population. We are talking about here 70 million people aged 65-plus by 2040.
That dwarfs the differences in increases in life expectancy that might or might not occur, which I think will make changes slightly, maybe bringing forward slightly or pushing back slightly what had previously been suggested. However, it is too early to say at the moment, and I am interested in seeing what the review comes back with on that because they had the benefit of more recent data than I did.
Q48 Selaine Saxby: Is there anything anybody else would like to add?
Jack Jones: I am also interested to see what the review comes out with, but I think from the data that we have and our experience over the last 10 years or so as a whole, it feels like we should be talking about shelving the planned increase to 67 rather than potentially bringing it forward or accelerating that increase to 68. The data we have had—even since John Cridland’s report—suggests we need a rethink on that.
Sally West: There are lots of experts on life expectancy—I am not going to go into that—especially with your earlier session. What strikes me is that there is still a lot of uncertainty. We don’t know the impact of Covid and long Covid. We know that the increase in life expectancy is stalling and that inequalities are, if anything, increasing rather than decreasing. All this leads us to conclude that we should not be thinking about speeding up the timetable at the moment.
Professor Land: Yes, I agree. I think we should pause in thinking we will go on making increases and, if we do, proper notice needs to be given.
Q49 Selaine Saxby: Are there any other factors that we have not touched on yet that the Government should be taking into account? Taking account of what you have just said, is there any basis on which a faster increase to 68 might be considered in your opinion?
Professor Mayhew: One of the things we haven’t talked about—we have talked about health inequalities, for example, as though they are something that we cannot do anything about, which to my mind is totally wrong. We also have, at the moment, a Government target to improve healthy life expectancy by five years to 2035.
Selaine Saxby: But no policies to support it.
Professor Mayhew: Well, no. My other work suggested that it would be very difficult, almost impossible, to achieve it unless you intervene in some very big way. Some of our work has focused on what you would need to do to do that: what things would make the biggest difference in the most deprived areas? Some of the things I might say you will not be surprised about.
Things like smoking tobacco still have a huge impact, something like six or seven years on healthy life expectancy and even more on life expectancy. I know that only about 15% of the adult population smoke now but there is this legacy of ex-smokers as well, which is hard baked into the system and is driving poor health. What we found, which you might be interested in, would make a big difference, especially in the unhealthiest of deprived areas, is that if you stop smoking tomorrow—and I know that is quite a hard thing to bring about—over a period of time it would improve healthy life expectancy by about two and a half years. I think that would make a big difference. That is only smoking. There are other lifestyle changes that would have nearly as big an effect but we have not looked at those yet.
Q50 Selaine Saxby: Are there any other points that any of the panel would like to add?
Jack Jones: It is hard to imagine the basis on which it could be justified at the moment. The only basis would be if we saw significant increases and rapid increases in healthy life expectancy in the most deprived areas.
Q51 Selaine Saxby: For me, it is fascinating that the most deprived areas—I am the MP for North Devon, and Ilfracombe is the most deprived part of Devon. The life expectancy in Ilfracombe in my constituency is 10 years less than the south of the county. That is just in the county of Devon where perhaps people would not expect those sorts of discrepancies.
Sally West: Yes, and I think that was the point that John Cridland made in his report with his very graphic tube lines, train lines and tram lines and things within areas, isn’t it? You cannot just say it is a region of the country.
Professor Mayhew: Can I make one other very important point? There is a gap between healthy life expectancy and life expectancy, but that gap is even bigger in the most deprived areas than it is in the least deprived areas. It means that in the least deprived areas you spend more of your final years in ill health and possibly in pensioner poverty as well than you would in the most affluent areas, because they are able to work. They are able to work beyond state pension age, like myself. They are able to volunteer, participate, help and care for other people, and health makes such a big difference to this whole equation. It seems to me you don’t find a solution to that by tweaking state pension age. You find a solution to it by having very strong health policies.
Chair: Thank you very much. Debbie Abrahams wanted to pick up a point.
Debbie Abrahams: It is just a very brief one following up on that. I am a former public health consultant and academic, so inequalities are something I know a lot about. About 15% of the impact on life expectancy is down to lifestyle. The biggest is around socioeconomic policy. It is getting our social and economic policies right that will make the biggest difference to reducing that. That is international evidence, not just in the UK.
Q52 Steve McCabe: I want to return briefly to the question about when people should be able to access their pension. I think you were all here when John Cridland said—if I interpreted him correctly—he was in favour of a universal access point because there was no evidence to show how it could be made to work any other way. Sally, Age Concern has said it should be earlier and I think you cited particular groups, carers and people with disabilities. How would you make it work?
Sally West: Broadly speaking, I think we agree on a single state pension age. Although you have flexibility to draw it later and get a higher pension, but thinking about the potential idea of drawing it lower and getting a reduced pension we would not agree with that. We do not think it is possible to have a system with that sort of flexibility where you could get a lower pension before.
We think that there is a—I am not sure I would even call it a flexibility. One of the options that you could do to mitigate some of the problems that we come across is allowing a very specified, quite small group of people and you could link it to receipt of benefit entitlement, like carers’ benefits, disability or incapacity for work benefits, only maybe three years before state pension age and with quite strict criteria. It would be a pretty small and clearly defined group for whom we think it would be appropriate to explore an early access.
I am thinking of some of the people we talk about who perhaps would not be entitled to means-tested benefits but still have a pretty low income, spending down their savings, perhaps have a partner in low-paid work so cannot seek a benefit. That is one area to explore. Then complementary to that you would look at a more generous means-tested system, so perhaps pension credit coming in at an earlier age.
I was interested to hear John Cridland explain why he had argued for that only at the age of 67. We always thought that was a rather modest proposal because we know there are people now who would benefit from that additional sort of income. He was explaining that his remit was to look at what happened in the next increase, and that is why he proposed it there.
We would like to see something like that happen sooner because we know that there are many people—for all the reasons we talk about, the health inequalities. Until we can tackle health inequalities and more general inequalities, let’s accept that there are people for whom it is very difficult to work until 66, 67, maybe more. One thing that we could do to mitigate for the people on low incomes is to look at higher levels of means-tested benefits coming in at that slightly earlier age.
Q53 Steve McCabe: Thanks. Broadly, you agree with him. You are not in favour of earlier access but reduced pension for the reasons I think he stated. There are two specific groups you would like to get earlier access, or at least have that looked at, but that would mean they would get a slightly better deal and you think that bringing forward things like pension credit might be the way out. Is that a fair enough—
Sally West: Yes, so it is two complementary approaches. I think that the early access to state pension would have to be a full state pension, otherwise you get into all the complexities of what happens if they want to claim means tested benefits. Are you expecting people to be on a lower pension for the rest of their lives? I think you could explore looking at specific categories of people, perhaps linked to the assessment for certain benefits and then looking at a broader category of people who could access pension credit at an earlier age.
Q54 Steve McCabe: Thank you. Does anyone take a different view?
Professor Mayhew: It is not so much a different view. I think there is huge value in the simplicity of the state pension age. You certainly do not want to create further complexity in an already very complex welfare benefit system. You should keep it pure and simple and you should find other solutions.
The other approach we have not discussed that may be worth mentioning is private sector pensions, enabling people to contribute to a pension from the first penny they earn, for example, or someone like myself who is contributing to a pension to be able to put that money into somebody else’s pension, perhaps someone not so fortunate, and get tax relief from it. This is what I mean by finding creative ways to reduce the burden on the state but give more personal responsibility to people and their loved ones. There are ways in which that can be done that need to be explored.
Jack Jones: I agree with everything said there by Sally and Les and I will add one more thing. Another potential partial solution is improving working age benefits. The big issue at the moment is the huge gap we have between the value of pension age benefits and working age benefits, which has built up over time. If you start to narrow that gap you would reduce some of the impact on people who were not able to stay working until state pension age.
Professor Mayhew: You do not want to erode the will to work, do you, if you see what I mean? Anyway, that is part of the debate.
Sally West: I was going to say that if carers had an adequate income, recognising their caring role, there would be less need for thinking about mitigation, state pension, people on the state pension.
Q55 Steve McCabe: Is there anything you wanted to add?
Professor Land: The carer’s allowance is one of the most complicated as well as the lowest benefits in the system. It is only worth two thirds of statutory sick pay and then the rules are so difficult. As I said, 30% don’t even get much money from it. They don’t get the full amount and some get nothing. It is a crazy system, and the rules are a hangover from the days of Beveridge and the notion of the male breadwinner and the dependent wife who stays at home and does all the caring of everybody.
Professor Mayhew: Did you say that the benefit is also withdrawn once you get to state pension age as well?
Professor Land: Yes.
Sally West: It is not exactly withdrawn. You are still entitled to it but you just cannot receive it.
Q56 Steve McCabe: Can I clarify one thing you said there? Maybe I misunderstood but you said that obviously if you defer your pension you get more, but isn’t that automatically taxed?
Sally West: It would be part of your taxable income, yes.
Q57 Steve McCabe: Do you actually get more if you defer?
Professor Mayhew: Net you are better off, yes, but it is not huge.
Steve McCabe: I see. Thank you.
Q58 Chair: Can I press you a little bit further on this question about giving access to pension credit a bit earlier, as John Cridland was suggesting? If the decision is made that we are not going to give anybody early access to the state pension, how effective do you think allowing early access to pension credit is? Sally, you were suggesting that you thought it should be more than a year. Tell us a little bit more about what you would like to see.
Sally West: It is almost a proxy for a lower life expectancy, because the people who are entitled to means-tested benefits are by definition on lower incomes. It would not be relevant to those who have plenty of savings. If you were looking at people in general who had lower incomes, it is likely to be those with lower life expectancies. The people who we are most concerned about are those who will find it hardest to get to state pension age and to then have a decent period in retirement.
You could perhaps look at reducing pension credit age on the basis that once the benefits are more generous for pensioners—and I would not say they are over generous but they are certainly more generous compared with benefits like Universal Credit and you don’t have the same conditionality. It would be a kind of proxy for expecting somebody to have a lower life expectancy and more risk of ill health.
Q59 Chair: Where would you set the age for eligibility for pension credit?
Sally West: I don’t know that we have come out with a specific period. You could look at something like the difference in life expectancy. I am not sure that we have said particularly. I would say more than a year; maybe people would say five years or three years. These are areas that we would be very interested in exploring. I haven’t seen any analysis.
The Pensions Policy Institute did some work, back in 2016, looking at some of the ways of mitigating state pension age. I am thinking about the first review. It might be worth looking at those. I can send you the link to those, but I think we are looking at the principles at the moment and thinking it would be useful to explore the different options, who they would help and what they would cost.
Q60 Chair: Any other thoughts on, first of all, whether giving access to pension credit is a helpful idea and, if so, when it ought to be—
Professor Mayhew: I am not an expert on the amounts but my perception is that the amounts you get from pension credit are actually very small. Basically, you would be putting more money in somebody’s pocket because they are unable to work for whatever reason. It seems to me you could compensate them through other parts of the benefit system, like employment support allowance or carer’s allowance or one of the others. There is an extra administrative cost if you were to do that and there would not be much financial gain. Again, I think it is fine tuning the existing system rather than creating a fifth wheel that doesn’t serve very much financial purpose, but that is without studying it in great detail.
Q61 Chair: I think pension credit is a bit more generous. The point that Jack was making about the big gap at the moment between working age and pension benefits is partly reflected in the number of pension credit—
Professor Mayhew: It may depend on your starting point.
Chair: Yes, what your other income is.
Sally West: I think the issue with something like carer’s allowance is that it is not a means-tested benefit. There is the point about it being quite complicated. When thinking about the difference between getting a means-tested working age benefit and getting pension credit, in general those levels are higher. We should perhaps consider whether pension credit would be a more appropriate benefit for people who are in the means-tested benefit system and are approaching pension age.
Q62 Steve McCabe: On the point you were both making there, would it be easier to just say that carer’s allowance should not stop when you reach pension age? That seems to be the major impediment. You are still doing the same activity, but because it is regarded as work substitute benefit it ceases. Would that be an easier, administratively cheaper way to address it?
Sally West: I think it would be addressing a different issue, to be honest, because it would be looking at older carers getting no recognition—“I’m caring and I’ve got my pension”. I suppose it is slightly different from looking at what support you would give to people in the run-up to state pension age if they are not able to work.
Professor Mayhew: On the face of it, it sounds very sensible but there are so many rules within rules there and unintended consequences. You would need to look at them.
Q63 Chair: Jack, does TUC take a view about when early access to pension credit should be?
Jack Jones: We are in a very similar position to Age UK, in that we think more than a year, but it would require some work to look at the impact. We hint at maybe three years would be a good start to look at, but that is not based on any kind of calculation.
Chair: Thank you. That concludes our questions to you. We are very grateful to all of you for giving us your time and the benefits of your wisdom on this this morning. Thank you all very much indeed. That concludes our meeting.