Our full consultation response
Club Vita's response to State Pension Age Independent Review
11 Jan 2017 - Estimated reading time: 1 hour
Where and how to set State Pension age (SPa) is a significant issue in social policy. Club Vita is delighted to respond to the Interim Report of the Independent Review of State Pension age. We collect and analyse longevity data from over 200 UK defined benefit workplace pension schemes, covering 1 in 7 of the UK pensioner population.
Summary of our views
State Pension is social insurance
The State Pension is a form of social insurance. The current system pools that risk across the UK society. However, in current times of considerable variation in both health and longevity outcomes the universality of SPa should be revisited.
If inequalities persist, or indeed widen, a system of variable SPa may deliver fairer outcomes.
If, however, the recent narrowing of the gap in life expectancy seen between different socio-economic groups continues, then retaining a universal SPa is preferable.
Varying SPa by socio-economics is viable
Varying by region is not a viable solution, however other methods of directly capturing variations in longevity offer potential to move away from a universal SPa and result in variations between regions in terms of average SPa.
Club Vita data highlights how earnings capture a consider amount of the longevity spread seen at age 65. Earnings are already captured in the national insurance system; one possibility is an SPa system based on career earnings could be designed e.g. with a lower SPa for ‘low’ earners.
Health matters
We suggest that the independent review focusses less on life expectancy and more on healthy life expectancy. For example, re-expressing the DWP formula in terms of how much of health adult lifetime it is affordable to spend in receipt of State Pension and monitoring this at successive reviews.
Measure life expectancy objectively
The use of cohort life expectancies makes the DWP formulaic linking of SPa to longevity very sensitive changes in mortality rates over the long term i.e. 50-100 years hence. We encourage greater emphasis to be given to observed increases in period life expectancy which can be objectively measured.
Be realistic on the reliability of long term projections
To be responsible and fair to younger generations, stating a precise SPa should be avoided. Language like ‘we anticipate your SPa will be between 67 and 72’ would set more realistic expectations amongst younger workers.
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