IMF Predicts UK Workers Could be working till 70

An International Monetary Fund (IMF) report has suggested that the UK state pension age (SPA) might have to be raised to 70.  Their findings were included in the latest edition of the IMFs Global Financial Stability Report. In the UK the state pension age for both men and women will rise to 66 by October 2020 and increase again to 67 between 2026 and 2028. A further increase to 68, between 2037 and 2039, has been announced by the government but not yet put before parliament. They argue that their research indicates that countries are underestimating how much longer people will live in future by up to three years, predicting a potential retirement age bombshell in future years. They go onto claim that the extra pension’s bill for most developed countries will be equivalent to half of their gross domestic product (GDP). Currently it accounts for 59% of Britain’s GDP. The pension cost deficiency is likely to be passed onto the taxpayer because the private sector is ill-prepared for even the current effects of people living longer.

Both the TUC and Age UK have pointed out that if life expectancy is increasing and some research indicates that that it has stalled, if not gone into decline, upping the SPA must not be seen as the only option. Age UK said ‘There are still huge disparities in healthy life expectancy across the country meaning the poorest socio-economic groups would be hit harder by changes to the SPA, especially those who are in ill-health, caring for relatives or out of work’. The TUC commented that ‘there has been a sharp slowdown in the rate of improvement in recent years. Whether this is down to the impact of cuts to public services, medical and lifestyle changes teaching a natural limit, or a mere statistical quirk has not been established. But it is enough to suggest caution’.

They also pointed out that there were large disparities between life expectancy based on location and even postcodes. For example a 65 year old male in Harrow is likely to live an additional 20.9 years which is six years longer than his equivalent in Glasgow City. The IMF does at least acknowledge that other policies may also be needed because STA increases ‘may disproportionately affected groups with lower than average life expectancy’. However it’s interesting that the IMFs own staff retirement plan has a normal retirement age of 62 although staff can take benefits at 55.

Whilst the publicity given to this issue by both the TUC and Age Uk is welcome, what is really needed is a new pension’s strategy for the UK. Occupational pension schemes are under attack across the UK and the state pension in completely inadequate. Auto Enrollment is a welcome improvement in occupational pensions but doesn’t go far enough. Faced with the loss of their Defined Benefit Scheme (DBS) the recent agreement between the CWU and Royal Mail to introduce a Collective Defined Contribution (CDC) scheme will provide a decent wage in retirement for postal workers. However the attacks of occupational pensions and the increase in the retirement age will continue until trade unions and the TUC develops a strategy for improving pensions for all workers in the UK.