The year-long independent review headed by John Cridland, former director-general of the Confederation of British Industry, into the UK’s pension policy came up with several recommendations. Here is a guide to what you need to know.
Timetable
We commit to a universal State Pension age across the UK which should increase to refect changes in life expectancy. To this end, we recommend:
- State Pension age should rise to age 68 over a two-year period starting in 2037 and ending in 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.
Triple lock
If further savings are needed to ensure fiscal sustainability, they are more appropriately delivered by moving in the future to uprating the pension by earnings. We recommend that the triple lock is withdrawn in the next Parliament. Under our recommended timetable, State Pension spending would be 6.7% of GDP in 2066/67, which is a reduction of 0.3% compared to the principal OBR projection. If the triple lock is withdrawn, spending will be further reduced to 5.9% of GDP by 2066/67.
Flexibility within a universal State Pension age
We believe that some of the funding released by changes in State Pension age and other aspects of the State Pension system should be re-invested to support disadvantaged groups:
- We recommend the main means-tested benefit for pensioners is set one year below State Pension age from the point at which the increase to 68 is introduced, for a defned group of people who are unable to work through ill health or because of caring responsibilities. This means that means-tested access to some pension income will remain at 67 and will continue to lag a year behind for rises thereafter.
- We recommend that the conditionality under Universal Credit should be adjusted for people approaching State Pension age, to enable a smoother transition into retirement. This should be included in the design of Universal Credit as it evolves currently. It would need to be in place, at the latest, by the point at which State Pension age rises to 68, in order to fulfil its mitigation objective.
Supporting working past State Pension age
We believe that there are measures which can help give people reliant on State Pension some of the same flexibilities as those who have private pension provision, by making modest changes to the benefit system:
- We recommend that people who defer their pension should have the option to be rewarded through a lump sum once they start drawing their State Pension
- We recommend that people over State Pension age should be able to part drawdown their State Pension – leaving the balance to beneft from the deferral arrangements. This should be introduced as soon as possible, but at least 10 years before State Pension age increases to 68.
Supporting carers
A large proportion of caring is undertaken by people approaching State Pension age, and changes in State Pension age are likely therefore to affect this group. We believe that employers and the Government should do more to help carers in the workplace:
- We recommend that all employers should have eldercare policies in place which set out a basic care offer;
- We recommend a system of Statutory Carers’ Leave for people with caring responsibilities. This could be based on the Statutory Sick Pay model, for perhaps up to 5 days, to enable informal carers to provide emergency care. This should be introduced as soon as possible, but at least 10 years before State Pension age increases to 68.
Mid-life MOT
A Mid-life MOT is a useful trigger point to encourage people to take stock, and make realistic choices about work, health and retirement.
- We recommend that people should be able to access a mid-life MOT and that this should be facilitated by employers and by the Government using online support and through the National Careers Service. Work on this should begin immediately.
Contribution of older workers as trainers
With an ageing population, older workers are essential to tackling skill shortages:
- We recommend that the Government and employers make more use of older workers as apprenticeship mentors and trainers – passing on skills from one generation to the next. Work on this should begin immediately.
Communications
Government has a responsibility to communicate directly with those afected by necessary changes to State Pension age. In addition, the Government should seek to use its partnerships with stakeholders to reach a wide range of people. The Review notes that take-up of certain National Insurance credits is much lower than it could be. The Government should also take steps to ensure that people can build as much State Pension they can. In addition to the recommendations above the review makes particular note of the following:
Automatic Enrolment Review
The self-employed do not beneft from automatic enrolment, which is largely responsible for the expected increase in private pension saving amongst employed people over time. We are encouraged to note that the 2017 Automatic Enrolment Review will be looking at how the growing group of self-employed people can be helped to save for their retirement and we believe that tackling this issue should be a priority.
We hope that the Automatic Enrolment Review will prioritise improving pension coverage for women. One option based on the Swiss model is that couples could be given the option to combine their private pension savings into a joint pot, to help mitigate disadvantage caused by one partner taking time out of the labour market (eg for childcare). We suggest that the Automatic Enrolment review takes this idea into consideration.
Photo © Michael Coghlan (CC BY-SA 2.0). Cropped and edited.
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