Clause 25 - Increase in pensionable age to 67

Pensions Bill – in a Public Bill Committee at 3:45 pm on 4th July 2013.

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Question proposed,That the clause stand part of the Bill.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 4:00 pm, 4th July 2013

We have reached part 2. Clause 26 is about the long-term further changes beyond age 67, but clause 25 is specifically about the increase to age 67. As has previously been announced, the state pension age is increasing to 67 over a two-year period from 2026 to 2028. The Chancellor forewarned us about it last year, I believe. It has been pre-announced. It is fair to say that having a state pension age of 67 in 2028 puts us in line with many other countries. Ireland got there first; Ireland will reach in 67 in 2021. The Dutch and the Australians will get there in 2023, the Danes and the Americans in 2027. We get there in 2028, and the Germans in 2029.

I have seen a letter-writing campaign suggesting that this is a grossly aggressive state pension age schedule that is out of line with those of other countries. It is absolutely mainstream. In many ways, one look at the longevity figures shows that frankly we are being quite pedestrian. There have been dramatic increases in longevity over the past century, and we will have changed male state pension age by only two years in over a century. People will be spending more time in retirement, even with the increases in state pension age, than they would have done some decades ago when men retired at 65.

It is often said that it is not fair to raise the state pension age because people have different life expectancies, as they do. It is worth saying that there has been a general increase in life expectancy for various socio-economic groups—the lowest socio-economic groups, and those in different parts of the country, nations and regions. Although there are substantial and important differences, any state pension age has the characteristic of having a different impact on different groups. We do not use that as an argument for not having a state pension age. We have a state pension age.

Given that life expectancy is rising across the board, often by similar amounts across different groups, raising it to 67 seems a modest and proportionate change. It is sometimes suggested, and was in our consultations, that a 10-year notice period was appropriate for changes. The Committee will note that this change does not come fully into force until 2028, fully 15 years from today. The Government cannot be accused of precipitate haste on the measure. We are in the mainstream of  similar economies and, indeed, behind some of them. This is an unfunded state pension scheme; these state pensions will be paid by the national insurance payers of 2028 and beyond. We have to strike the right balance between allowing people to enjoy the growth of longevity in retirement, which we will through our proposals, and putting an excessive burden on the national insurance payers of tomorrow. We will talk about later state pension ages in later clauses.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

One issue that has been discussed at considerable length, including in connection with the previous Pensions Bill, is the fact that a number of people are out of the work force for health reasons considerably earlier than 65. There is a cost to Government and those individuals to maintaining them on other sorts of out-of-work benefits. Have the Government considered researching that in more depth, on the basis that some kind of provision might be made for them, even in the run-up to an increased pension age?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

The hon. Lady is right that there is a set of people who do not make it, in terms of active labour market participation, to current state pension age. There always have been. Our view is that those issues need tackling at source; to some extent they have been. The change in heavy manufacturing, coal mining and other occupations, which tended to be associated with shorter life expectancy, the decline in smoking and a set of other factors mean that the chances of making it to state pension age, even at 67, are substantially greater than even a generation ago.

The state pension age, which is one number in the system, cannot do 1,000 different things. There has to be a point at which one gets the state pension. If we think that there are differentials—different parts of the country, different social groups, different industry groups—then we have to address those issues, but if we used the state pension age to do so, it would affect so many other people in ways that make the system unsustainable that we do not think that is the relevant lever to pull. We will obviously return to these issues when we come to the next clause and discuss our longer-term strategy. I believe that the move to 67 in this clause is entirely measured, forewarned, proportionate and in the mainstream of similar economies. I commend the clause to the Committee.

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

I thank the Minister for that explanation of the clause. I listened closely to what he said, and there was much sense in it. He is right to say that the increased pension age does not put the UK outside the broad spectrum of pension ages in similar economies. We will come to this in more detail on clause 26 and the amendments to it, but I should just say that health inequalities in the UK are, to a greater or lesser extent, more severe than in similar industrial economies. That makes the point that my hon. Friend the Member for Edinburgh East made even more powerful. The Minister said rightly that there are inequality issues that need to be dealt with at source. They emerge at pension age, but they are inequalities in themselves.

We have significant health inequalities that are relatively greater than those of other nations. I remember that not long ago Sir Michael Marmot, who is probably the world’s leading expert in health inequalities, gave an interview to the Financial Times and observed that if  the UK’s health inequalities did not improve dramatically, the number of people able to work until the new pension age would be much lower than the Government are probably banking on. When comparing the UK with other countries, we must bear in mind not just the relative pension age, but how significant our health inequalities are.

Photo of Oliver Colvile Oliver Colvile Conservative, Plymouth, Sutton and Devonport

Is the hon. Gentleman aware that in Plymouth there is an 11-year difference? Between people living in Plympton and Plymstock, which are not in my constituency, and Devonport, which is, there is an 11-year gap in how long people can expect to live. It is appalling.

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

I was not aware of the specific case in the hon. Gentleman’s constituency, but it does not surprise me. In some places in Glasgow, life expectancy is in the mid-60s but a few miles down the road it may be around 80. It is striking. The Minister is right to say that the issue must be tackled at source, but we are discussing pension age, and having heard what the hon. Member for Plymouth, Sutton and Devonport said, we must bear that in mind. Sir Michael Marmot has made it clear that health inequalities in Britain are such that some stark questions arise whether raising the pension age will work. We are talking about raising it to 67 and average longevity keeps rising, but within that average there are stark discrepancies such as that in the hon. Gentleman’s constituency.

Photo of Pamela Nash Pamela Nash Labour, Airdrie and Shotts

I support the rise in the pension age to 67, but I am also worried about the life expectancy gap in different areas. The issue is not just life expectancy. My hon. Friend referred to the health of those who are expected to work longer. They may live longer, but not necessarily in the best of health. The period of healthy living has not increased as much as longevity.

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

My hon. Friend makes a good point, which we will come to when we discuss clause 26. We heard Baroness Hollis talking about the difference between healthy life expectancy and overall life expectancy. She suggested that there are 10 years of healthy life expectancy, and potentially another 10 years of increasing, chronic disability. Those are huge challenges not simply for any one Government, but for the entire country. I am sure that we will go into the matter further when we consider clause 26, but the Opposition do not intend to stand in the way of clause 25.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.