Pensions & savings· Wealth & assets· Intergenerational Centre Britain’s inheritance boom could further decouple people’s retirement age from their state pension age It’s inheritance and where you live which are the barriers to retirement 31 January 2023 by Molly Broome Molly Broome The UK’s state pension age is going up – and perhaps faster than expected. The age at which you can draw the state pension is due to rise from 66 to 67 by 2028. And the Government is now reportedly considering bringing forward the rise to 68 from 2046 to the 2030s, as part of its wider plans to encourage older workers to stay in the labour market. Everyone broadly knows why the pension age is going up: we’re living far longer than we were back in the 1940s when the state pension age for men was set at 65. So, if we want the same level of public services without much higher taxes, we have to work longer. In the UK there’s generally been a fair amount of political consensus around doing this – in marked contrast to France, where workers are busy striking over plans to raise the pension age from 62 to 64. While there was opposition to the increase in the women’s pension age from 60 to 66 over the past decade – the speed of the change, not it’s end point, was the focus. But there is one key reason why further pension age rises may draw more opposition – rising life expectancy is both slowing and diverging. Life expectancy in Glasgow for men is just 73 – 11 years below that in Kensington – a gap that has grown over the past decade. This stark inequality of life expectancy means that while it is easy to justify delaying the long retirement of people living in wealthy areas in South Cambridgeshire, it risks punishing people from deprived areas like Blackpool who will enjoy far shorter retirements. Crucially, we need to think about this question of who gets to retire when in a broader context – just focusing on the state pension age risks missing a lot. For instance, wealth transfers between generations are already playing an increasing role in society – the value of inheritances is set to double over the next two decades. Some people say that this inheritance boom will be the answer to millennials’ struggle to get onto the housing ladder. But rising life expectancy means that the typical millennial is set to inherit at age 61 – far too late to make a difference to home ownership rates during the key child rearing years. But those growing inheritances will make a huge difference to who can retire when. The inheritance boom is more likely to help millennials pay off their last, rather than secure their first, mortgage. Why does this matter? Because paying off your mortgage is a key gateway to retirement. The pension age is not of course the retirement age. If you’re lucky enough to be from an affluent area and stand to inherit from your baby boomer parents, then you probably don’t need to worry about the pension age as it’s possible you’ll have the option of retiring before then anyway. But if you’re from a deprived area and don’t have wealthy parents or grandparents, you face having to retire later while dying earlier than your wealthier contemporaries. That’s not a recipe for a fair, or socially cohesive, society. So, while we need to work longer as a country, we need to be clear who we’re talking about and look far beyond changes to the state pension. Part of the answer is spreading the inheritance boom more fairly via the tax system, and so is having a functional health service that supports those in their fifties and sixties. High health and wealth inequalities combining to drive very unequal retirements is not what a success for Britain looks like. This article was originally published in inews
