Steve Webb: How to manage a longer working life

In March, John Cridland completed a year’s work for the government, reviewing what should happen to state pension ages in future. His focus was not on those who are close to pension age but on what should happen in 2030 and beyond. The central question he was asked to address centred on how far and how fast pension ages should increase to reflect that the fact that we are – on average – living longer. But he was also asked to look at whether certain groups, such as those in particular parts of the country or who had worked in particular industries, would be especially adversely affected by any increases.

The basic principle on which the government is working is that in future we will spend two thirds of our adult life in work and one third in retirement. So, for example, if a 20-year-old is expected to live to age 95, his or her seventy-five year adult life would be split 50 years in work and 25 years in retirement. This implies a state pension age of 70.

All in the timing

For now, John Cridland has focused on the timing of the next increase in pension age, beyond the move to 67 by 2028 already on the statute book. A law passed nearly a decade ago suggested that the pension age might reach 68 by 2046, meaning that anyone currently in their 20s or 30s would have to wait until at least 68 for a pension. Since that law was passed, life expectancies have continued to improve (although at a rather slower rate than in the past), and that timetable now looks too slow. So the Cridland review recommends that we get to age 68 by 2039, seven years earlier than previously planned. The consequence of this is that those in their early to mid-40s will also have to wait until they are 68 for a pension.

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However, the Cridland review stresses that governments should not simply jack up state pension ages and walk away. Instead, the report proposes a number of ways in which this transition could be smoothed to help people adjust to longer working lives.

One of the interesting ideas in the report is for a mid-life ‘MOT’-style review of your career and plans for the future. The main idea is to look at whether you are likely to be able to go on doing the type of work you are currently doing until you are well into your 60s. If not, the thinking is that you would plan ahead, perhaps retraining and acquiring new skills, so that you can move into a new line of work, which could keep you going until you can draw a state pension.

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Another focal point of the Cridland report is on the position of carers who may find that they have to reduce their hours or give up paid work because of caring responsibilities. If they also have to wait longer to receive a state pension, they may find it particularly hard to make ends meet. One recommendation is to have a system of statutory care leave, similar to statutory parental leave, which would allow carers to take time out of paid work to look after someone but still have the ability and the right to go back to paid work once their caring responsibilities had diminished.

Means-tested help

What about those who have already dropped out of paid work well before state pension age? Cridland recommends that a year before pension age there should be additional means tested help for those who are unable to work through disability. At the other end of the scale, for those who are willing and able to work beyond pension age, he recommends new flexibilities to allow them to combine part-time work with taking part of their state pension.

One avenue that Cridland has ruled out, however, is the idea of different pension ages in different parts of the country. Whilst it is true that there are big differences in life expectancy between different areas, the report shows that there are also big variations even within individual cities. Having different pension ages in different areas would create new injustices as well as being extremely complex to implement. The Cridland report makes it clear that we are heading for a world of longer working lives.

Steve Webb is director of policy at Royal London

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