PROPOSITIONS : Retiring at an age of equality

Labour thinks pensions for all at 60 are too costly, so why not 63, asks Donald Dewar
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The Independent Online
The Pensions Bill is now in the House of Lords. It is a mass of technical detail but has far-reaching consequences in a field where the Government has failed badly, whether in the value of pensions, means- testing, take-up, or the poor regulation of occupational pensions. Among other things, the Bill imposes a common retirement age for men and women of 65 - a small clause but a big argument.

The change is to be phased in and does not start until 2010. No one born before 1950 will be affected. It is the long-term implications that matter. Ministers imply that the various alternatives can be simply costed. The truth is the figures are open to wide interpretation, depending on retirement habits and the behaviour of the labour market.

Many will argue that the obvious way to achieve equitable treatment would be a common retirement age of 60. For an opposition party, it is tempting to give in to the pressure. But that would be irresponsible. Labour is seen as a government-in-waiting and must act like one.

Equalising at 60 would, on the Government's figures, cost £5bn in 2025. It also runs against the intuition of many people that demographic pressures require a raising of the pension age, some Tories arguing for a common age of 67.

The state pension is just one factor and often not the dominant one in decisions about retirement. Occupational pensions and Serps are maturing. Employment prospects and work satisfaction will often be more relevant. The concept of one retirement age and no entitlement to state pension before that date seems old-fashioned.

A flexible approach would be sensible. It should be possible to draw a pension any time between 60 and 70. The idea of a decade of retirement has widespread support in the pensions industry. The Government Actuary estimates that a pivotal age - when someone with a complete contributions record receives the full state pension - could be set at 63 with a "broadly neutral" economic impact. Indeed, it would save £1bn in real terms in 2025 and £9.5bn in 2035.

The argument points to 63 as a pivotal age, though Labour will want to review this when the technical resources of government are available to us.

Many women are understandably fearful about being left without any state pension until 65. The pensions industry has treated women badly. By the end of this decade, only 25 per cent of women will retire with a full pension and only 65 per cent in 2020. Introduction of a retirement age of 65 will, according to the Government, make "little difference".

Many people are being forced into retirement in their fifties with little hope of work. A majority of men between 55 and 64 are now out of the labour market. For many, the future is means-tested benefits.

There is a strong case in equity for 63. Equalising at 65 would mean no shortening of the wait for the pension for men and a very long road to financial security for women. The Government's case is that given the opportunity of choice, too many will exercise it. That rather proves a point.

If the Government does insist on 65, it is essential that the savings they so confidently predict are used to strengthen the position of women and other disadvantaged groups. Labour will look for commitments on this during the passage of the Bill.

The author is Shadow Secretary of State for Social Security.

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