Mid-life pension MOTs on road to longer working lives

Former CBI Director-General John Cridland has published his review into the State Pension Age (SPA). It recommends raising the SPA, options for people unable to work in later life and mid-career pensions planning advice.

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Publication of the final Independent Review of the State Pension Age report, Smoothing the Transition charts the likely evolution in state pension provision beyond 2028.Mr Cridland makes a number of recommendations the report, which will be considered by parliament before any decision is made on changes to the State Pension age timetable after 2028. These include:
  • State Pension age should rise to 68 between 2037 and 2039
  • State Pension age should not increase more than one year in any ten-year period, assuming that there are no exceptional changes to the data used
  • that all employers should have elder care policies in place, which set out a basic care offer
  • that people should be able to access a mid-life career MOT and review, which should be facilitated by employers and by the government using online support and through the National Careers Service. This would look at an individual's personal aspirations over the coming years from a career, income and pensions perspective.

Exploring pensions and working life today

This latest pensions review, required by each parliament under the Pensions Act 2014, invited perspectives on alternatives to a universal state pension age in acknowledgement that traditional fixed patterns of work are changing.Further, it sought to build an understanding of why people drop out of work early, at a time when the government is trying to boost numbers of people working later in life through the Fuller Working Lives strategy.

Challenges of paying for longer retirements

Illustrating the scale of the UK's state pension challenge, Mr Cridland remarked in the report the stunning progress made on life expectancy. In 1917, 24 people received a card from King George V for reaching the age of 100. Last year, our monarch sent a card to 6,000 people. In around 30 years’ time, that number is set to increase to over 56,000.At the same time, state pensions will make up a growing proportion of national GDP: from 5 per cent to 7.1 per cent. In trying to balance these challenges, Mr Cridland has also tried to acknowledge individual stories.“Behind every average figure like average life expectancy, lies a full spectrum of individual life stories, from the least to the most advantaged," noted Mr Cridland. "The least advantaged are characterised by poorer health and lower life expectancy, as well as lower earnings and savings. The State Pension age will impact on them in different ways. One size does not easily fit all without other mitigation of these impacts.”

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CIPD welcomes insights

Responding to the publication of the Cridland Review on the State Pension age, Charles Cotton, performance and reward adviser at the CIPD, the professional body for HR and people development, said “Ensuring we build a pensions system that is both affordable and sustainable is an ongoing challenge and we welcome the report’s honest insights into the challenges that the pensions system faces.“Raising the state pension age is a sensible move in order to balance these competing challenges, and the introduction of a ‘mid-life MOT’ is very welcome. This will help people plan for retirement by assessing their lifestyle and retirement expectations as well as their skills. It will not only help set their expectations but also give them opportunity to invest in the skills and training they may need to support themselves in their later working life.“CIPD research shows that knowing when people are going to retire is an important consideration in retirement decisions, and this has implications for workplace planning. The extra clarity that this report brings should spur employers to look at their workforce and ensure they are doing everything they can to support workers who want to work up to, and potentially beyond, state pension age.“This includes everything from eliminating unconscious age bias in their recruitment and reward processes, to ensuring that their workplace is set up to accommodate older workers, to helping them transition out of the workforce in a way that suits them.”

Further SPA rises on horizon?

Alongside Mr Cridland’s review, the Government Actuary’s Department (GAD) also published research today. It considered two alternative scenarios for the State Pension age. The first was to reflect an adult in receipt of the State Pension for 32 per cent of their projected adult life in retirement. The second was for 33.3 per cent, both using figures drawn from life expectancy projections from the Office for National Statistics.It concluded that under the first scenario the State Pension age could rise to 69 between 2040 and 2042. Under the second, it could rise to 69 between 2053 and 2055.

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