The concept of a universal retirement age is difficult to justify because socio-economic class, geographical location, level of earnings or occupation are all such significant predictors of longevity says the Association of Consulting Actuaries.
But identifying a methodology to ensure a ‘fair’ approach to different groups of people is fraught with complexity and probably unworkable says the body in its response to the Cridland review of state pension age.
ACA argues giving individuals access to their state pension up to five years before State Pension Age is amongst the most straightforward solution, although it points out that the principle of retaining a state pension that would keep individuals at a minimum required level of income would be broken, creating potential increases in means-tested benefit payments.
ACA says encouraging people to use non-State pensions before reaching SPA would help individuals cover a gap where they were unable to work or could not find employment late in life.
The body also proposes the introduction of a State benefit for individuals meeting certain ill-health criteria ahead of SPA, or early access to State pension based on the length of working life, although both these solutions would involve increased costs to the Government.
The ACA paper rules the idea of giving all individuals within a certain age range a right to draw down their State Pension as they wish, effectively seeing the Government running the world’s largest drawdown arrangement. ACA argues this would be impractical and likely to mean too many would exhaust their state pension unless there were constraints on annual withdrawals.
ACA argues it would be unreasonable not to expect the State Pension Age to be set so that people on average would be able to draw their State Pension before they start to experience poor health and are therefore no longer able to support themselves by working.
ACA chairman Bob Scott says: “We would be very happy to work with the independent review of State Pension Age in developing the thinking around the models we have explored or others that might be proposed via the consultation exercise.
“We would also underscore the need for any future changes to take proper account of the need for state reforms to be considered alongside the pension regimes and rules applying in respect of private pensions. A joined-up approach that simplifies both state and private pension rules would represent a welcome statutory innovation!”