Linking state pension age to longevity – tackling the fairness challenge
Feb 10, 2014 | REPORTS
An investigation into linking state pension age to longevity and healthy life expectancy
This discussion paper, “Linking state pension age to longevity: Tackling the fairness challenge”, aims to summarise the key issues regarding the use of life expectancy measures in UK policy, and has been published as part of the Age UK Research Fellowship.
The substantial increase in life expectancy is one of the great human achievements of the past century. However, increased life expectancy and the ageing of the population, has often been considered a threat to the economy due to the increased size of the retirement population in relation to the working population. From 2007 to 2032, public expenditure on pensions and related benefits is projected to rise from 4.7% of Gross Domestic Product (GDP) to 6.2% (Malley et al., 2011). Linking life expectancy to policy appears a useful strategy for helping to address this imbalance, but will this approach be effective and equitable?
This report investigates these questions by exploring the drivers behind worldwide demographic shifts and the ageing of the population as well as discussing how life expectancy is calculated. This is followed by an analysis of how life expectancy has been linked to various policies in the UK, focussing on pension age, but also considering other benefits that have eligibility tied to age or pension status. It also explores alternative measures that take account of health and disability, their relationship to socio-economic status and how other countries have addressed this issue.
The paper highlights how increasing the state pension age raises a number of equality issues, and may not provide the perceived financial benefits, including:
• While increasing state pension age appears a natural extension of improved life expectancy the extent to which workforce participation can be pushed into later years is worthy of consideration. Life expectancy is a measure of quantity of life and is significantly longer than measures of quality of life such as healthy life expectancy and disability-free life expectancy.
• Measures such as healthy life expectancy and disability-free life expectancy vary significantly by region and social class, and in consequence particular groups are more likely to be disadvantaged by a rise in the state pension age than others, particularly those from disadvantaged areas and lower social classes.
• Increasing state pension age into ages where disability rates are higher, raises concerns about transferring spending from the State Pension to disability and unemployment benefits.
Authors: David Sinclair, Kirsten Moore and Ben Franklin