Hiking retirement age to 70+ inequitable, say experts

Dramatic hikes in the retirement age in the UK would be short-sighted, according to employment experts at Liverpool Business School and elsewhere.

Today’s report from the International Longevity Centre suggests UK workers are headed for 70+ retirement by the mid 2040s, pointing to growing life expectancy and falling birthrates.

The UK pension age of 66 is set to rise to 67 by March 2028. From 2044, it is expected to rise to 68. But the research suggests that this is not enough, and that anyone born after April 1970 may have to work until they are 71 before claiming their pension.

But such rapid rises would be inequitable in today’s Britain where older people hold increasingly disproportionate amounts of wealth, argues Dr Madeleine Stevens, an industrial relations expert at LBS.

“The government will see the benefits of this strategy, whereby they can hold on to more funds, while the weight falls on individuals rather than the Exchequer to find the shortfall. Yes, they can keep taxes lower, but even talking about large hikes is politically risky.

“Asking people to work beyond 70 has the potential to cause significant social protest. In France, remember, there was outrage with a million-strong protest opposing Macron’s bill to increase the retirement age from 62 – 64!”

Dr Stevens agrees that tax receipts are under pressure, not least because of low wages over a decade or more, weaker migration to the UK post-Brexit and a separate rise in people economically inactive due to preventable poor health.

According to the Office for Budget Responsibility, pensioner benefits will cost the UK government £136bn in 2023-24, of which £124bn will be spent on state pensions.

Jonathan Cribb, associate director and head of retirement at the Institute for Fiscal Studies, said that further rises would “disproportionately impact poorer individuals whose ill-health means they have shorter lives, and so who receive pensions for less time.”

The Intergenerational Foundation, an independent thinktank, agreed that the pension age had to rise, but questioned on whose shoulders that cost should fall. Younger people, their research has found, do not have the financial assets that their parents and grandparents did. In 2010, those under 40 held £7.53 of every £100 of wealth. By 2020, that had fallen to £3.98.

And the problem with people continuing work into their 70s is that they lack the flexibility to help shortage occupations, added Dr Stevens.

“11% of over 65s already do work but even if that figure were to increase hugely, they are likely to stay on in existing roles if forced to stay on. In other words, this strategy does not help in addressing the UK skill shortages.

“Older workers are increasingly less likely to be occupied in construction, hospitality, care and other work which demands antisocial hours and higher physicality,” she said.