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Old 10-07-2009, 04:03 AM
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Mary Pat Campbell
Join Date: Nov 2003
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Pensions once supported people for two or three years, but now it is more like two to three decades. Mr Osborne sometimes talks about "the fruits of economic growth", and – once recovery arrives – these might have been banked on to cover the costs, were it not for the new cross-party consensus for restoring the link between pensions and earnings. That will give pensioners their fair share of rising prosperity, but will also consume all the available fruits. Extending longevity will therefore entail either new taxes or working for longer. State pension costs are the biggest chunk of the welfare bill, at 63bn a year. Raising the qualifying age by a year might shave 3%-6% from that total, far more than would be got by a full-frontal assault on smaller benefits paid to the poor. In theory, at least, it should also carry a less devastating social cost.

In practice, however, everything depends on the steps taken to protect the vulnerable – detail we heard little about yesterday. Life expectancy has, after all, risen faster in rich communities than in poor ones, as David Cameron pointed out in the days before financial conservatism overshadowed the compassionate strain. Asking dispossessed older people, sometimes with failing health, to scrape by on the weekly 64.30 of jobseeker's allowance is not a tolerable option. It is more objectionable still if coupled with plans to hector claimants into jobs.

The first thing needed is a clear pledge to ensure that pension credit, which is paid to the poorest, will remain available to 65-year-olds. At the same time there is an urgent need to end the continuing scandal of employers shunting staff out simply on grounds of age. Last but not least, there are the implications for women. Their pension age is already rising to match that of men, as is required by European equality laws.

The Tories belatedly recognised yesterday that women would not take kindly to being asked to swallow two age rises at once. But they could not explain how they would target the early increases on men without falling foul of Brussels – instead they responded in Brownian style, by promising a review. Asking us all to work longer is a tough sell. To make it persuasively, the Conservatives must first show they have done their homework.

Bringing forward the increase in the retirement age will mean about 2.5 million people - aged between 48 and 57 - will have to work at least a year longer than they were expecting.

Under the Tory plans, the retirement age for men will rise from 65 to 66. However, the move will hit women in their late 50s particularly hard as the age at which they can claim their state pension will rise by three years - from 60 currently, to 63.

The Conservative policy, which is also designed to bring the state retirement age for both men and women more closely into line, represents a dramatic acceleration of the Government’s own plans to force people to work longer.

Gordon Brown is planning to increase the state retirement age for men from 65 to 66 but not until 2026. It will then rise to 67 in 2036 and 68 in 2046. The state retirement age for women will rise from 60 to 65 between 2010 and 2020 under the Government’s proposals.
The announcement represents a political gamble by the Conservatives as Mr Osborne will risk alienating important older voters. However, he is thought to believe that the policy is important to demonstrate that the Tories have a serious plan to cut public debts.

Mr Osborne will say today: “This is another one of those trade-offs any honest government has to confront. All parties accept that to afford that with an ageing population, the state pension will have to rise.
“No one who is a pensioner today, or approaching retirement soon, will be affected. But this is how we can afford increasing the basic state pension for all.”
The peer, who is now the head of the Financial Services Authority (FSA), the City regulator, said in July: “If I was redoing my report I would be more radical, arguing for an even faster increase in the state pension age.”

In his review he considered whether the retirement age should rise to 70 by 2030. The Conservatives are now considering whether this could become a reality. Several other European countries are also considering similar increases in the state pension age to tackle their deficits although Labour is not thought to be currently reviewing its plans.

According to the DWP, 95 per cent of all pensioners, equating to 7.8 million people, receive the state pension. However, because so many women have not worked full-time throughout their adult life, very few receive the basic state pension of 95.25 a week, and 81 per cent of all pensioners rely on some income on top of state benefits to fund their retirement, DWP calculates.

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