Pensions bill problems

The government's plan to raise the retirement age to 68 could be both expensive and inequitable, according to a new article from the Centre for Market and Public Organization.
Sarah Smith points out that the rich live longer than the poor. Life expectancy at 65 is another 17.5 years for social class I, but only 13.4 for social class V. Raising the retirement age therefore reduces the value of a pension more for the poor than for the rich.
And uprating the pension in line with earnings rather than prices benefits the rich more, as their greater longevity means that they gain more from the power of compounding (assuming earnings rise faster than prices).
What' s more, she says, raising the retirement age might not save much money. This is because many people stop working before retirement age because of ill-health. Increasing the retirement age therefore merely means people will claim incapacity benefit for longer.
What was that Blair said?:

it is the combination of economic efficiency and social justice that marks this government out from its predecessors.

Comments

[Tom H]

"Increasing the retirement age therefore merely means people will claim incapacity benefit for longer."

Well, it won't mean that, because incapacity benefit is in the process of being abolished.

That's not entirely a pedantic point about names of benefits - the new system will include more emphasis on getting people who are out of work for reasons of ill-health or disability back into employment, with the intention (realistic or otherwise) that fewer people will be on benefits than at present. Obviously, the question of whether the number of people taken off the benefit rolls by welfare reform will be matched or exceeded by the number of older people coming into the benefit system through ill health is a difficult one to calculate. And, equally obviously, there are a whole range of factors affecting the employability of older people which have very little to do with the benefits system, or the pensions system.

[james higham]

But it wouldn't affect Mr. Average, right?

[AntiCitizenOne]

Did you know that private pensions don't have this problem.

Your annuity income is increased when you have lower life expectancy/ higer mortality.