A growing health divide means retirees in poorer regions of the country will miss out on thousands of pounds as the state pension age rises, analysis for Money Mail reveals today.
The Government last week launched a major review into the state retirement age, including plans to up it to 68.
At the same time, a study by pensions consultants Lane Clark & Peacock (LCP) this week revealed that stalling life expectancy means that the state pension age — which is due to increase to 67 in just five years — should not change for more than two decades.
Longer waits: The age at which someone can start collecting their state pension hit 66 last year
Further analysis for Money Mail reveals that a growing health and wealth gap means any hike to the retirement age will hit northern regions harder — while well-off southern areas pocket more state pension money.
The age at which someone can start collecting their state pension hit 66 last year. It is due to rise again to 67 between 2026 and 2028, and then to 68 between 2044 and 2046.
The Government has said the move to 68 should be brought forward to between 2037 and 2039.
A review of the state retirement age announced last week will consider changes in life expectancy and also regional inequalities.
Yet campaigners have called on the Government to consider letting those in poor health collect their state pension earlier as they are unlikely to receive it for as long as those with a greater life expectancy.
Here Money Mail looks at the case for a state pension age overhaul.
We are not living longer
Pensions consultancy LCP says predictions of a longer-living population failed to materialise even before the pandemic — and the pension age should not rise to 67 for another 23 years as a result.
This would mean millions of workers nearing retirement could collect their pensions a year earlier than expected, but that would cost the Treasury close to £200 billion.
The firm’s analysis shows if the Government stuck to its policy of linking state pension age to life expectancy the increase to 67 should be delayed to 2051, because the Government expects retirement to last no more than a third of the average lifespan.
Sarah Taylor, 61, will be caught up in the state pension age hike, and will now get hers when she is around 66 and nine months.
The extra nine-month wait will see Sarah, from Tunbridge Wells in Kent, miss out on more than £6,000.
The married mum-of-two, who runs a software development company, says: ‘As a 1960s baby, we all had expectations of having pensions when we were 60.
A review of the state retirement age announced last week will consider changes in life expectancy and also regional inequalities
‘But that all changed and it keeps on getting further away. It just feels it is almost unfair. It is a lottery when your birthday falls.’
Sarah adds: ‘When you get past 60, you never know what could happen. I have paid my National Insurance over the years so I want to get what’s owed to me.’
The study also found that the state pension age hike to 68 should be put off until the mid-2060s. Scrapping current legislation would be a retirement reprieve for millions born in the 60s, 70s and early 80s.
In 2014, the Office for National Statistics (ONS) predicted a 66-year-old woman could expect to live to 89. By 2018, this forecast had been cut to 87.
Former pensions minister Sir Steve Webb, now a partner at LCP, says: ‘The Government’s plans for rapid increases in state pension age have been blown out of the water by this new analysis.
‘Even before the pandemic hit, the improvements in life expectancy which we had seen over the last century had almost ground to a halt. But the schedule for state pension age increases has not caught up with this new world.
‘This analysis shows that current plans to increase the state pension age to 67 by 2028 need to be revisited as a matter of urgency.’
The state pension age was only increased to 66 last year. It came after nearly four million 1950s-born women missed out on close to £50,000 after their state pension age was increased from 60 to 65, in line with men.
Bitter at system that pays me less
Carol Mercer lives in Widnes, Cheshire — one of the most deprived areas in the country.
She has not been able to work since she was 62 after struggling with problems with her knees.
Now 67, she had a knee replacement this month. Her husband Keith, 69, had a stroke earlier this year.
Carol Mercer (pictured with husband Keith) has not been able to work since she was 62 after struggling with problems with her knees
The former Post Office counter worker’s mother died at 73. Carol has paid National Insurance for 39 qualifying years after starting work at 16 and only taking one year out for the birth of her son.
She also spent just under five years living in Spain.
Carol says the state pension should be available early to those who need it.
She says: ‘I cannot feel bitter about what other people get and what I am not getting, it’s not their fault.
But I do feel bitter towards the system that does not take into account that people’s lifespan and people’s health is different according to where they live and what kind of a job they have done.
‘Things like that aren’t taken into account by the system. If I had got my pension at 60 we could have enjoyed a few healthy years together.’
Health and wealth gap
ONS figures show the average healthy life expectancy across the UK is now 62.9 years.
That means the average person’s health starts to decline at least three years before they can claim their state pension and this will soon increase to four.
Life expectancy at birth is currently just over 79 for men and nearly 83 for women. But ONS figures also show the nation’s lifespans are not increasing as previously predicted.
Analysis of the data by broker Interactive Investor reveals that declining life expectancy will cost retirees in some regions close to £4,000 in state pension cash, while improvements in other areas mean some retirees will receive more than £3,000 extra.
A major cause of the disparity is the higher mortality rates from heart and lung diseases in more deprived areas. Workers from less-affluent areas might also have had jobs that take a bigger toll on their health.
Men in Yorkshire and Humberside will lose out on £3,736 after their life expectancy fell by nearly four months.
Women in the East and West Midlands, and also Yorkshire and Humberside, will also miss out on £1,868 after their life expectancies fell by around two months.
The sums are based on retirees receiving their pension from 67 at today’s rates of £179.60 a week.
Elsewhere, life expectancy has kept on rising. As a result, women in the South West are predicted to receive about £3,736 more in state pension in retirement as they are thought to live 18 weeks longer.
Men in the South West stand to collect an extra £934 after their predicted lifespans rose by nearly six weeks.
Rebecca O’Connor, head of pensions and savings at Interactive Investor, says forcing workers to wait any longer to retire risked penalising those in poorer areas whose life expectancy was lower.
She says: ‘Life expectancy isn’t rising any more. All of the assumptions that these measures are based on need revising.
‘Given what we have been through with the pandemic, now is the moment to review exactly what we are pegging the age entitlements to and where that leaves people.
‘People are being denied decent retirements through state pension entitlement age increases and this affects people in some parts of the country more than others.
‘As the state pension rises, not only will people in some regions have shorter retirements, they may also have poorer retirements if they had to give up work before they became entitled to the state pension due to ill health.’
Former pensions minister Baroness (Ros) Altmann is also calling on the Government to consider allowing those in poor health to access their state pension earlier.
She says using average life expectancy to calculate state pension age was a ‘sledgehammer approach’ that ministers could no longer justify using.
She says: ‘It will disadvantage increasingly those who are least well off and in poor health. It does seem the opposite of “levelling up”.’
Ministers urged to rethink broken triple-lock promise as inflation soars
The chancellor is facing calls to rethink next year’s state pension pay rise as inflation rockets.
Campaigners last night said April’s increase of 3.1 per cent would not be enough for the nation’s 12 million pensioners who face soaring prices.
Inflation, which has now topped 5 per cent, is eating away at the value of pensions and savings.
It comes after ministers broke the Government’s triple lock promise to increase the state pension every year in line with the highest of either earnings, inflation or 2.5 per cent.
Ministers have broken the Government’s triple lock promise to increase the state pension every year in line with the highest of either earnings, inflation or 2.5%
The Treasury abandoned the rule for a year after the pandemic distorted earnings figures that would have meant pensioners received an inflation-busting pay rise of more than 8 per cent.
Instead the state pension, which is worth more than £9,350 a year, will rise with September’s rate of inflation at just over 3 per cent.
But campaigners say as inflation has since surged to over 5 per cent, this is a 2 per cent pay cut in real terms.
Many retirees will also have private pension incomes that do not rise with inflation, as well as nest-egg savings in accounts paying rock-bottom interest rates.
Former pensions minister Sir Steve Webb says pensioners face a huge squeeze unless the Government acts.
Sir Steve, now a partner at consultancy Lane Clark and Peacock, says: ‘State pension payments will fall in real terms, income from private pensions will be squeezed, and inflation will erode savings’ value.’
Rocketing energy and food prices are helping to fuel inflation, now at the highest rate in a decade. Dennis Reed, director of campaign group Silver Voices, says: ‘Surging inflation shows the Chancellor’s folly in scrapping the triple lock on state pensions. Millions will now be struggling.’
Interest rates paid on savings have sat at record lows in the pandemic, with most High Street banks paying just 0.01 per cent.
Figures from pension firm Aegon show £1,000 left in a savings account paying average interest of 0.19 per cent would have lost £47 in purchasing power since last Christmas.
North and South split
ONS data also shows that a 65-year-old man in Glasgow can expect to live a further 15 years, whereas someone in Westminster is predicted to live for another 23 years.
The lowest further life expectancy for women aged 65 is also in Glasgow at 18 years, with the highest in Camden, North London, at just over 25 years.
And analysis for Money Mail by LCP shows that pushing ahead with plans to hike the state retirement age by one year would now cost a woman in Glasgow around 5.5 per cent of her total state pension. Yet a woman in Camden would lose out by just 4 per cent.
A man in Glasgow would suffer a 6.7 per cent cut, compared to just 4.3 per cent for a male in Westminster.
The impact of delaying retirement for poorer pensioners is also greater as they are more likely to be wholly dependent on the state.
Figures show that the poorest 20 per cent of single pensioners have a total weekly income of £158, with £141 coming from the state pension and other benefits.
Yet the wealthiest 20 per cent of pensioners have a total income of £722, with just £231 coming from their state pension.
Those who are unable to work while they wait for their state pension have to rely on universal credit. And while the full state pension now pays around £179.60 a week, universal credit pays more than £100 less at £74.96.
LCP partner Sir Steve says: ‘Raising state pension ages has a disproportionate impact on those in poorer areas. It removes a bigger proportion of their lifetime pension rights and they also have lower incomes from other sources to tide them over.
‘The result will be that more people in these areas will end up on the subsistence benefit rates payable by the universal credit system.’
A Department for Work and Pensions spokesman says: ‘The state pension continues to provide the foundation for retirement planning and financial security in older age. The review will consider whether the rules around state pension age are appropriate, based on a wide range of evidence including latest life expectancy data.’
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