Boost For Wealthy From Pension Overhaul
DECEMBER 1ST, 2006
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Better-off people stand to gain more from government pension reforms than the less well-off, research suggests.
The Centre for Market and Public Organisation looked at the impact of raising the state pension age to 68.
It concluded that manual and lower paid workers live on average seven years fewer than professionals and would not benefit as much from the reforms.
It added that more people could end up claiming incapacity benefit while waiting to collect their state pension.
This, the group said, could lead to the government's benefit bill rising by a larger amount than anticipated.
Unintended consequences
Even the plan to restore the link between the state pension and earnings may have unintended consequences, the group said.
This is because professional people live longer and therefore will benefit more from the restoration of the earnings link; planned for the next parliament.
Poorer people tend to suffer more from ill-health and therefore often spend their 50s and 60s out of work and claiming benefits.
Extending the pension age to 68 will do nothing to ease this problem, according to Sarah Smith, the report's author.
"The high levels of non-employment among those in their 50s, particularly those with few qualifications, suggests that the real challenge...is not to encourage people to work beyond 65, but to get them employed up to age 60," Ms Smith wrote.
Pension plans
The government outlined its programme of pension reforms in its Pension Bill on Wednesday.
The bill is the product of several years of public consultation and debate, and includes most of the main recommendations of Lord Turner's Pension Commission which reported last year.
The main proposals are to:
link increases in the basic state pension to earnings during the next Parliament
raise the state pension age to 66 between 2024-2026, to 67 between 2034-2036, and to 68 between 2044-2046
reduce the number of years it takes to build a full basic state pension from 44 years for men and 39 for women to 30 years for everyone
create a new delivery authority to "bring on board the expertise needed to design a personal accounts system".
In particular, the bill is meant to boost the pension prospects of women.
At present, fewer than one in three women retire with a full state pension.
By 2025, the government estimates that nine out of 10 women will be entitled to a full state pension.
