Cridland: Increase SPA and make employers deliver mid-life MOT

State pension age should rise to 68 by 2039, seven years earlier than currently planned, the triple lock should be abolished and part-deferral of state pension should be introduced, the Cridland Report has recommended.

John CridlandFormer CBI director-general John Cridland’s independent review into state pension also calls for a mid-life MOT to help people plan for later life, to be delivered by employers and the National Careers Service.

His proposed change in state pension age (SPA) would mean anyone aged under 45 today would have to wait until at least age 68.

The report comes as a Government Actuary’s Department report points to a SPA of 70 for anyone under 30, a move that former minister Steve Webb, of Royal London, said would see the Government misleading Parliament as it would breach the one year of retirement for each two years of work principle agreed by MPs.

Cridland also proposes the reintroduction of a lump sum option for state pension referral, but he has not listened to calls for early access, a way to ensure those with shorter life expectancy, on average those with lower incomes, do not lose out as a result of the increase in SPA.

Modelling of total pension income over the coming decades shows later generations retiring on higher incomes than today’s pensioners as both state and private entitlements increase.

TUC General Secretary Frances O’Grady says: “Hiking up the state pension age will hit low paid workers the hardest. And it will punish those who become too sick to work.

“Ending the triple lock while driving up state pension age would be a stealth cut to the future incomes of workers who are today in their 30s and 40s.

“There is a 20 year gap in healthy life expectancy between the richest and poorest. These changes risk only the wealthy enjoying a decent retirement.”

Baroness Altmann says: “I agree with Cridland that the triple lock should be abandoned by 2020. The report highlights the trade-off between more generous pension increases and raising state pension age. ‎Indeed, the longer the triple lock stays, the greater the pressure to keep raising state pension age which will further disadvantage those groups with lower life expectancy.

“It is disappointing that the review decides against early access. People with shorter than average life expectancy generally still pay around a quarter of their salary in National Insurance. They may have worked for 50 years or more but may die before being eligible for any state pension – or may receive very little. This seems inequitable and their lower life expectancy is not recognised by our National Insurance rules. Normal insurance would usually charge lower premiums to such people but that does not happen. Therefore allowing early access could compensate for this even if for a reduced pension.”

Hargreaves Lansdown head of retirement policy Tom McPhail says: “This report is going to be particularly unwelcome for anyone in their early 40s, as they’re now likely to see their state pension age pushed back another year. For those in their 30s and younger, it reinforces the expectation of a state pension from age 70, which means an extra two years of work. This report also looks like the death-knell for the State Pension Triple Lock.”

“The good news, in as much as there is any here, is that these measures will help to keep the state pension sustainable in the long term. The proposals around a mid-life MOT, employment opportunities for older workers and split deferral of the state pension should all help to extend working lives.”

Royal London director of policy Steve Webb says: “If the Government goes ahead with the more radical timetable for pension age increases – as set out in the Government Actuary review – they would be guilty of misleading Parliament.  In the last Parliament MPs voted for the new arrangements on state pension age increases on the basis that people would spend two years in work for every one year in retirement.

“On this basis, no one at work today would have a pension age of 70.  But on the more aggressive schedule that the government is considering, everyone in their twenties would have a pension age of 70.

“This is not what Parliament voted for and is clearly driven by the Treasury.  It is one thing asking people to work longer to make pensions affordable, but it is another to hike up pension ages because the Treasury sees it as an easy way to raise money.
“The triple lock has helped to restore the state pension from a very low level in 2010. Whilst it should not continue indefinitely it would be right to review the policy at the start of each Parliament rather than abolish it now.

Many people retiring in years to come will have very modest private pensions and the state pension will be of vital importance to them. We should be careful not to base policy for decades in the future on the basis of the incomes of people retiring now.”