Waiting for Gordon

It was heralded as the “work until you drop” report, but the Turner Commission’s proposals on the future of UK pensions turned out to be much friendlier to life beyond employment than some had predicted. Much to chancellor Gordon Brown’s chagrin it came down against a massive expansion of the pension credit means test and in favour of state pension increases linked to earnings.

Adair Turner’s report also promotes the view that longer life expectancies should result in later retirement, which would have to be balanced against an increase in the tax burden. It put forward options for a slow rise in the retirement age from 2030 onwards, going up to between 67 and 69 by 2050, while also floating a scheme of low-cost private pension provision. 

In setting out its solution to the pensions crisis, the commission pulled off the trick of making it sound almost painless. Even carers were drawn into the conjuring act: basic state pensions would be dependent on residency rather than contributions so that those who have given up work to provide care would no longer be penalised, a fillip for the 390,000 carers at any one time who are not building up pension entitlement. It also recommended that people already over 75 should receive the basic pension regardless of their contributions record.

The Department for Work and Pensions welcomed the report and will publish its response later this year, but the Treasury’s lukewarm reaction will not inspire confidence. Few poorer pensioners would lament the passing of Brown’s beloved means test if it were compensated by an increase in the universal entitlement as Turner suggests.

Mervyn Kohler, head of public affairs at Help the Aged, said the report reflected a “growing consensus” around the need for a decent state pension linked to earnings and the inadequacy of a means-tested alternative in the long run. “Kicking the report into the long grass would therefore be a failure of epic proportions,” he said.

Under the current system, 70 per cent of pensioners would qualify for means-tested pension credit by 2050, potentially disastrous given the mere 65 per cent of pensioners with entitlement who bother claiming it, despite the tens of millions of pounds the government has spent on publicity. Welfare rights expert Neil Bateman says it is essential the government stops ratcheting up the means test. “It’s the road to ruin: expensive to administer, prone to error and extremely intrusive. In the attempt to administer pensions justice, you end up with pensions injustice.”

By backing the argument that longer lives should mean longer at work, the commission has thrown the issue of health inequalities into stark relief. The gap in life expectancies between rich and poor has widened under this government: research published last year by the Universities of Bristol and Sheffield showed a maximum difference of nearly 10 years in average lifespans between deprived Glasgow City (72.9 years) and wealthy Kensington and Chelsea (82.4 years). Averaging across poorer and richer areas between 1992 and 2003, researchers discovered that the gap had widened by 0.15 years over the period, with the poorest living 76.2 years while the richest lived until 80.3 years old.

Turner acknowledges that these inequalities will have to be tackled if raising the pension age is to be fair. For those who reach 65, the commission claims, life expectancies are growing for all socio-economic groups: men in the low-income class five can expect another 13 years and women another 17 years. But men and women in high income class one respectively still enjoy a bonus of five years and three years more than their class five counterparts. 

While the report is clear that the key response should be an end to health inequalities, it is by no means confident that this will be achieved when the retirement age begins to increase. As a stopgap it proposes either that the means-tested pension credit (supposed to ensure that all pensioners reach the guaranteed minimum income, currently £109.45) should continue to be available from age 65 or that the basic state pension could be collected earlier than the state second pension. If the retirement age climbed to 68 in 2050, it suggests, an equal cost approach would be to split the two pensions, making the basic pension available at 67 years and three months and the second pension collectable at 69.

Neither compromise is appealing. “Health inequalities will not be reversed in the Turner time scales – in fact, it would be an achievement if the trend in widening inequalities were turned around,” Kohler says. “What we’ve got is a messy interim solution, recognising that we’re not going to get rid of the inequalities on day one.

“Turner intended to introduce more clarity and transparency to the system, but the danger here is that we end up making it more complex. The pension credit at one age, the basic state pension at another age, the state second pension at a different age, and a contract with your employer to work until yet another age – none of this makes for simplicity.”

Crucially, the split pensions proposal would hasten availability by only nine months, much less than the existing reduction in life expectancy of the poorest pensioners, whereas the pension credit proposal opposes the goal of less means testing and is anyway short on detail: how would the qualifying groups be identified and where would the line be drawn? Would these groups have automatic entitlement, having passed the means test, or would there have to be an incapacity benefit-style medical examination?

Stephen Burke, chief executive of older people’s charity Counsel and Care, says that the government faces a dilemma which will only be resolved when long-term policies around Sure Start, occupational health and the public health white paper start to make an impact on inequalities. It may take 50 years to complete the process. “In the meantime, there’s a moral issue here.

Some groups of people won’t live as long as others and their rights need to be protected.”

Access to work forms the background to the Turner proposals, though it is sketchier than some commentators would have liked. Later retirement depends on a ready supply of flexible job
opportunities for older people, yet the high unemployment rate among the over-50s (about 30 per cent are out of work) shows just how far there is to go. Age discrimination legislation coming into force this October will still allow over-65s to be dismissed for age-related reasons, a loophole that Turner wants closed.

Although the report is helpful to carers out of work, it has nothing to say about carers who want to work at least part-time, beyond 65 if necessary. According to Emily Holzhausen, policy manager of Carers UK, Turner’s major omission is the clash in government policies which ask people both to work longer and to spend more time caring for their friends and relatives.

“Care services are a hard nut to crack,” Holzhausen says. “If carers are to work not only do they need flexible employment policies, but they need home care workers to turn up at the right time and day centres to keep more convenient hours. The current system is predicated on families not working, but things have changed. It requires a whole new culture shift to respond to what working carers need.”