UK's state pension age rise risks widening inequality

Raising the state pension age in line with higher life expectancy risks increasing inequality in retirement benefits, with a well-off 40-year-old woman living in east Dorset today likely to receive £67,000 more in benefits over her lifetime than her poorer counterpart in Corby.

The research, prepared by the Trades Union Congress, looked at government plans to raise the state pension age (SPA) to 67 by 2020 because increasing life expectancy is putting the nation's finances under strain.

However, the report highlights that although the national average for life expectancy is increasing, it is not rising uniformly among men and women, among higher and lower wage earners and between different geographical regions.

But the issues raised by the TUC go to the heart of what is perhaps the most vexed issue for state social security systems: is a state pension an insurance policy intended to protect individuals who outlive their ability to earn a living or is it a universal benefit?

When UK pension legislation was introduced in 1908, the average male life expectancy was 48 and critics charged they would be making contributions to a benefit that most would never receive.

Then, as now, those who live longest are generally the most wealthy, meaning that state pension benefits are worth most to those who are rich.

On average, a woman in east Dorset who retires in 2028 can expect to collect £195,436.80 in total benefits in retirement, compared to her counterpart in Corby, Northamptonshire, who will collect only £137,030.40.

By 2028, the difference in the state pension income received by workers in local areas with the highest and lowest life expectancy at 65 will grow to 47.7 per cent from 37.7 per cent for men, and to 52.6 per cent from 33 per cent for women, based on current projections.

There are also gender inequalities because on average women live longer than men, regardless of income, geography or type of employment.

The government's failure to consider persistent inequalities in life expectancy when accelerating the rise in the state pension age will leave millions far worse off in retirement, claims the TUC.

It is urging the government to reverse its decision to raise the state pension age and instead set up an independent commission to examine inequalities in life expectancy and their affect on people's retirement incomes.

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"The government's decision to accelerate the rise in the state pension age will mean millions of people having to work for longer in order to receive less in retirement," said Frances O'Grady, TUC general secretary.

However, the UK's move comes as most governments in industrialised economies are looking to raise the age at which workers can receive old-age benefits to counter strains on the cost of social insurance.

The US introduced legislation as far back as 1983 to gradually raise the age for its full social security benefits, while most European countries have moved to raise pension ages more recently.

However, even within the 33 wealthiest nations in the Organisation for Economic Cooperation and Development, the TUC claims the UK has been more aggressive in raising SPA than most. By 2050, under current legislation, the average male state pension age within the OECD will be 65.6 years, below that contemplated in legislation currently passing through the UK parliament

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