Today’s announcement that the state pension age will increase faster than previously planned is not surprising given the looming pressures on public finances, but it doesn’t go nearly far enough.
A state pension age is inherently unfair
In our early childhood the genetic effect of growing up is sufficiently strong that it does (sort of) make sense to link important transitions – like going to school or being able to vote – to chronological age. By the time we reach 65 though, the environmental impact on our development has long since outweighed the genetic effects of aging – decades spent smoking or exercising or working in a stressful job or taking regular holidays have an enormous impact on our health. The difference in healthy life expectancy between the richest and poorest is 18 years.
This means setting a state pension age at all is inherently unfair. It means that, on average the richest can stop work at 65 ready to enjoy a decade or two more of healthy, happy retirement, while the poorest are already struggling with disability and will die much sooner.
Raising it is not really the issue
Many have attacked the raising of the state pension age announced today as unfair because it will disproportionately benefit richer people, who will have longer, healthier retirements in which to enjoy their pension.
But stepping back a bit, the unfairness doesn’t arise from the raising of an arbitrarily-determined cut-off, it arises from the health inequalities that mean some people will benefit more from it than others.
There are two ways to address this:
1) Everyone gets their own state pension age, linked to their own individual healthy life expectancy. So someone who has smoked all their life, got by on low wages in a physically demanding job might be able to claim at 55, while someone working a cushy desk job, who exercises regularly and eats healthily could claim at 70. Both with an estimated 15 years left to live. This is theoretically possible to calculate – life insurance companies do it all the time – but would of course be completely impractical; it would introduce some very perverse incentives, it would be a nightmare to implement, and in any case statistics like these don’t really mean much at this individual level.
2) The only other alternative is to reduce inequalities in (healthy) life expectancy, so that when we all retire at the same age some of us are not left much worse off than others. There are lots of things a sufficiently forward-thinking government could do to help with this, around lifestyle, health care, planning, income inequality. Michael Marmot’s comprehensive review published in 2010 is the ultimate guide. The problem is, governments don’t do them because they would mostly require planning ahead, sometimes by decades, and – as we’ve explored many times before – government’s aren’t very good at that.
So why not link rises in the state pension age to reductions in health inequality?
Government doesn’t tackle health inequalities because it doesn’t have an incentive to. But a brave, forward thinking government could embed public health deeply into the psyche of the public sector if it announced and then embedded in legislation that the state pension age would only rise as planned once health inequalities had been reduced by a predetermined amount.
There would be targets and target dates, which would maintain the status quo until they were reached. The state pension age would become a factor not just of life expectancy (as the Chancellor is announcing today) but also of inequality in life expectancy.
Government would be, in effect, holding itself hostage. It would provide an extremely powerful budgetary incentive for governments to invest heavily now in public health order to save on some alarming, looming pension bills that would come crashing in if they didn’t.
Ultimately of course it could be repealed, so it’s not quite the gun to the Chancellor’s head that it might appear. But that repeal would hopefully be in the face of significant public anger and in the meantime it would be embedded in OBR spending forecasts and in Treasury spending plans. It would tie in these large economy-level indicators to the everyday actions that determine our health in later life.
It would not be enough on its own (we also need to reform the labour market to make it more suitable for older age) but it would be a powerful start. It would for the first time introduce a measure of fairness, and early action, to the state pension.
Image courtesy of Tax Credits