A higher state pension age is only fair if the huge differences in healthy life expectancy are tackled. Legislation is needed to make raising the SPA conditional on achieving greater health equality
Deputy prime minister Nick Clegg justified last year’s announcement that the state pension age will rise faster than previously planned by pointing out that 'the principle that a third of your adult life is in retirement...has been the rule of thumb for a long time.'
In future the SPA will be linked to projected life expectancy, updated every 5 years. But ONS analysis released last week revealed once again the health inequalities that make this argument fundamentally unfair.
In the richest areas of the country, 80-84 year olds are in better health than people twenty years younger living in the most deprived areas. The ONS concluded, unsurprisingly, that 'future fitness to enjoy retirement is likely to be more favourable for the least deprived population.'
In fact in about half of local authority areas healthy life expectancy is below the traditional state pension age. There is a 25 year gap in life expectancy between the richest and poorest areas of London.
So while the richest are able to retire and enjoy years or even perhaps decades of healthy living, the poorest must struggle through to retirement having already lost their health, and are likely to die soon after.
This unfairness is clearly a consequence of setting pension eligibility at such an arbitrary age. In our early childhood, the effect of growing up is sufficiently strong for it to make sense to link important transitions – like going to school or being able to vote – to chronological age.
However, by the time we reach 65, the social, economic, and environmental impact on our development has long since outweighed the genetic effects of ageing – decades spent smoking, not exercising, living on a low income or working in a stressful job have an enormous impact on our health.
One - clearly impractical - way to address this unfairness would be to give each individual a 'bespoke' state pension age, so that we could all enjoy roughly the same proportion of our lives in retirement.
The other, more realistic, solution is to dramatically reduce health inequalities, so that the state pension age does not discriminate against the most deprived. Governments have made some effort to do this. But as Derek Wanless observed back in 2004, it is striking that, although much has been written about the issue, 'rigorous implementation of identified solutions has often been sadly lacking.' The same could be said to be true now.
This inaction when it comes to tackling health inequalities stands in sharp contrast to the government’s decisive move to raise the state pension age. Pensions forecasting has spelt out our liabilities decades into the future, and government has been made painfully aware of the unsustainability of keeping a state pension age stuck at 65.
In response, politicians have acted. But when it comes to health spending the perspective is decidedly short term and all attention is focused on acute services; only 4% of health spending goes on prevention.
So how do we stimulate the same long term thinking and decisive action in tackling health inequalities that we have seen in relation to reducing pension liabilities? One solution, which the Early Action Task Force will suggest in a report due in early spring, is to tie the two issues together, by legislating to make rises in the state pension conditional on falling health inequality.
Only once certain health equity thresholds were met would the state pension age be allowed rise. This would have two impacts.
First, it would ensure that raising the state pension age did not disproportionately disadvantage the poorest, since the SPA could only rise if the health gap between rich and poor was closing.
Second it would provide government with an extremely strong fiscal incentive to tackle health inequality, since the sustainability of the state pension system would be riding on their success.
Government would be forced to think long term about health inequality and consider investing now in order to save vastly more in both reduced healthcare costs and unsustainable pension payments.
They should be doing this anyway, but clearly are not. Would this measure tip the balance?
The legislation could, of course, be repealed by a future government - but it would then have to justify to the public unfair rises in the state pension age. In the meantime the issue of health equity would sit at the heart of fiscal policy, where it belongs.
Will Horwitz is a researcher for the east London charity Community Links, which hosts the Early Action Task Force. Its report, Looking forward to later life, will be released in early Spring
