Lord Sheldon
To ask Her Majesty’s Government whether they are giving further consideration to extending the state retirement age beyond the present age of 65, and 68 in 2046.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the noble Lord has, of course, previously suggested that there should be a formal relationship between pension age and life expectancy. We have consulted on a mechanism to ensure that revisions in life expectancy are reflected in the state pension age. The summary of responses was published on 27 July and we will publish our proposals in due course.
Lord Sheldon
My Lords, the pension age will be equal for men and women in only seven to eight years’ time, and it will rise from 66 to 68 in 2044. That is very slow. Longevity is rising so rapidly that an assessment has been made that more than 11 million people can expect to live to be more than 100 years old. Should not the pension age be affected by the rapid rise in longevity?
Lord Freud
My Lords, the noble Lord is right to pinpoint what is happening to longevity. There needs to be a response to that because we cannot afford to pay for the large number of people who spend upwards of 40 per cent of their adult lives in retirement with a state pension. The process that we are undergoing is to look at how best to move the pension age with either a review or some automatic process, and we will be coming out with our proposals for that in due course.
Lord German
My Lords, a woman born this year will have a one in three chance of living to the age of 100, whereas a woman born in 1931 would have had only a one in 20 chance. Given the acceleration of the change in life expectancy and the results of the consultation that the Government have just concluded, is it not right that there should be an accelerating change in the connection between the state age of retirement and life expectancy, which is growing all the time? We cannot expect this to be something that is predicted for 20 or 30 years hence. It has to be predicted on a much more regular basis.
Lord Freud
My Lords, clearly that is the issue: life expectancy is growing rapidly. It is hard to set the figures many decades in advance. The responses to the consultation show that most people think that a period of around 10 years seems appropriate, although other countries have used shorter periods. It is right that we should look at a number of factors when we move the retirement age. These include not just longevity but healthy life expectancy and regional and other variations.
Baroness Hollis of Heigham
My Lords, it is clearly reasonable that the pension age for men and women should rise alongside longevity. However, it is clearly unreasonable that up to half a million women have recently learnt that they will have to wait up to two years longer than they expected for their state retirement pension. The noble Lord will know that many sectors of the House were deeply unhappy about this. The Pensions Bill is now in the other place. Will he tell the House whether the Government are shifting their position on this so that it is fair to all women and not so deeply unfair to so many women?
Lord Freud
My Lords, as the noble Baroness pointed out, we debated this in some depth when we looked at the Bill. Those concerns, expressed around the House, were taken very seriously. The Secretary of State responded at Second Reading in another place by saying that we needed,
“to implement the change fairly and manage the transition smoothly”.—[Official Report, Commons, 20/6/11; col. 50.]
We are looking at how best to do that. Should there be legislative changes, they will of course come to this House to be considered in due course.
Lord Flight
My Lords, I urge the Government to accelerate to a retirement age of 70, not just on grounds of longevity and fitness but on fundamental economic grounds. It is entirely natural, if you have an ageing population and wish to keep economic growth up, that the workforce should remain the same through people working longer. Finally, the highest growth in new jobs now is among people over 65, so this is a reality in the workplace.
Lord Freud
Yes, my Lords, it will be extremely expensive if we do nothing. In the past five years we have already seen real expenditure on pensions go up by £20 billion to £81 billion a year. If we do nothing, the projections are that age-related spending will go up to more than 5.5 per cent by the middle of the century. We must do something about it. That is why we have this consultation to look at the best way of moving the pension age upwards to reflect the changes in ageing.
Baroness Drake
My Lords, the level, manner and timing of any increase in the state pension age will be controversial, as instanced by the recent debate on women’s state pension age. I hope the Minister will agree that it is important to build a consensus on how to respond to increasing life expectancy, both between political parties and between government and the people. In particular, we must avoid undermining confidence in pension saving, particularly in younger generations, where the problem is so deep. Are the Government considering setting up an independent body to monitor and analyse matters related to increasing life expectancy, including socioeconomic differences in morbidity and mortality? Its published findings could inform government and parliamentary decision-making. Anecdotal, sentimental and emotional debate is not the way to resolve this issue.
Lord Freud
My Lords, this is a long-term issue and one needs to address it on a long-term basis. When the Chancellor introduced this topic, he said that he would like to see it addressed on a cross-party basis. That remains the position.