Tory MP puts case for later retirement

A FIRM challenge to the growing Conservative view that Britain is facing a demographic crisis from the growing numbers of elderly, and that the only solution is to means-test the state pension, came yesterday from David Willetts, MP for Havant.

Mr Willetts, a Number 10 policy unit member under Margaret Thatcher and past director of the Centre for Policy Studies, the think-tank that she founded, said: 'The real problem is not that too many people live too long, it is that too many people stop working too soon.'

A package of policies that equalised women's retirement age with men (from 60 to 65) and then raised both to 67, would improve the 'dependency ratio' - the numbers in work who pay for the pensions of those retired, he said. And the pension should be re-cast by providing more to the over-80s - those who retired in the Sixties and Seventies who are much worse off than later retirers benefiting from occupational pensions and Serps (the State Earnings Related Pension Scheme).

But, at the same time, personal pensions should be encouraged at the expense of occupational schemes which aim to pay two- thirds of final salary. In a paper for the Social Market Foundation, Mr Willetts said that because the pension entitlement built up heavily in the final years 'it pays employers to save on these'. That, combined with increments which give older workers higher pay, gives employers 'a double incentive to press for early retirement'.

Reducing pay, or moving to part-time work for older workers, was so unattractive under final salary schemes that personal pensions had to be encouraged in their place, Mr Willetts said. 'It immediately creates an incentive for someone to stay in work for as long as possible.'

Raising women's retirement age to 65 would save pounds 3bn, which could be spent helping poorer, older pensioners. That would allow state pensions to be better targeted 'without becoming involved in further complicated and intrusive means tests'. However, the paper acknowledges 'a crisis' in the labour market from the dramatic fall in the numbers in work in their 50s and 60s - the result of compulsory early retirements and redundancies. 'This is a dangerous absurdity,' Mr Willetts said. 'Such men have been compulsorily driven out of work, but cannot regard themselves as simply retired. The emotional and psychological strain must be appalling.'

The trend towards earlier and earlier retirement, 'makes little sense, either for the nation's economy . . . or for individuals who often find themselves eking out an existence on a relatively modest income for decades to come. It should be a high priority of public policy to try to reverse this trend'.

He added: 'Society might be able to handle the relatively modest and gradual increase in life expectancy. The strains become serious if . . . people leave the workforce younger and younger. The de facto retirement age for men is rapidly moving down into the mid-50s. The right policy is to move gradually back up to the mid-60s and beyond.'

The Age of Entitlement; Social Market Foundation, 20 Queen Anee's Gate, London SWH 9AA.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Environmental Adviser - Maternity Cover

£37040 - £43600 per annum: Recruitment Genius: The UK's export credit agency a...

Recruitment Genius: CBM & Lubrication Technician

£25000 - £27500 per annum: Recruitment Genius: This company provides a compreh...

Recruitment Genius: Care Worker - Residential Emergency Service

£16800 - £19500 per annum: Recruitment Genius: Would you like to join an organ...

Recruitment Genius: Senior Landscaper

£25000 - £28000 per annum: Recruitment Genius: In the last five years this com...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones