Pension Age Rethink
A recent spike in deaths could prompt the government to rethink pension age and backtrack on previous plans to make people wait longer to access their state pension, experts are warning.
ONS data, released yesterday, revealed there were 153,717 deaths registered in England in the first quarter of 2018 – more than any other first quarter for the last five years and 18,145 deaths above the five-year average.
“These figures add further fuel to the idea that the increases in longevity we have seen for so many years are beginning to slow down and if this trend continues there will be major implications for policy around state pension age, for instance,” said Helen Morrissey, personal finance specialist at Royal London.
In light of the new figures, Morrissey added the government might want to “push back” plans to raise state pension age. The Department for Work and Pensions (DWP) last July proposed bringing forward the date for increasing the state pension age to 68 by seven years, from 2046 to 2039.
Charles Cotton, senior adviser for performance and reward at the CIPD, added that more work needed to be done to understand why recently witnessed improvements in longevity were slowing, while any proposals to increase pension age above 68 “may be put on the backburner”.
However, he said any changes the government made were not likely to be immediate at any rate. “Things have to be phased in anyway and you have to give people a long notice period,” he said.
It is not clear what caused the death rate rise, although the ONS noted a bout of influenza and cold snaps during February and March were likely to blame.
“However, if the figures repeatedly show that something has changed then policymakers need to do more to understand the underlying drivers and their implication for policy making going forward,” said Morrissey.
The government has been gradually increasing pension age since the modern state pension’s introduction in 1948. According to last year’s DWP Pension Age Review in the late 1940s, the average person could expect to live for 13 and a half years after the then pension age of 65. By 2007, people were expected to carry on living for another 21 years after reaching 65, prompting the government to introduce legislation to increase the state pension age.
Also yesterday, the government announced regulations to require pension trustees to publish a sustainability assessment of their investment choices, in the hope it will help pension schemes be held to account on issues like climate change and poor corporate governance.
DWP figures, released earlier this month, revealed those eligible for auto-enrolment stashed away £90bn in total into their retirement pots in 2017, an increase of £4.3bn compared with 2016.
The same statistics also showed a sharp rise in the number of younger savers. In the private sector, the proportion of employees aged between 22 and 29 saving into a workplace pension had risen from 24 per cent in 2012 to 77 per cent in 2016.
“As we see the younger generation who care more about where their money is going, they are also increasingly questioning that their pensions are invested in a way that aligns with their values,” said Esther McVey, work and pensions secretary. “This money can now be used to build a more sustainable, fairer and equal society for future generations.”
Tracey Crouch, minister for sport and civil society, added: “This is an exciting opportunity for social impact investment, giving pensions trustees a chance to have a resoundingly positive effect on the global issues that matter to savers.”