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Pension ages: reforms focus attention on longevity gaps

Riots on the streets. A cancelled state visit. France illustrates the political perils of raising the state pension age. Fears of a similar backlash prompted politicians in Britain to postpone a planned rise this week. A recent fall in life expectancy is one reason to tread carefully. Another is the longstanding gap between the rich and poor.

The UK government had intended to bring forward a planned increase in the pension age of two years to 68. It wanted to bring this forward from 2044 by as much as seven years. But the bad news on life expectancy — as well as a recent tax concession for the wealthy — made this a politically hard sell.

In the century to 2011, life expectancy increased in the UK by nearly three years every decade. In a 2017 review, actuaries projected a continued rise. That has not happened. Life expectancy at retirement is now two years less than previously expected. This stalling progress predates the pandemic, but its direct and indirect effects are likely to have exacerbated the issue.

Chart showing UK life expectancy by location. Top and bottom five by local area (number of years for 60-65 year olds, estimates from 2018-20). Top and bottom five for men and women.

Yet that two year gap pales in comparison to regional variations in longevity. Almost eight years separates the life expectancy of retirees living in exclusive parts of London like Kensington and Chelsea to those living in Glasgow. A 60-year old man in the Scottish city might live a further 19 years. For his London contemporary that rises to 27 years. In both places women live almost three years longer than men.

Life expectancy in France is relatively high at 82, three years above the 2020 OECD average. However a similar regional gap exists. Unlike the UK, the variation in longevity between different regions is smaller for men than it is for women.

Ageing populations are putting a huge strain on the public finances. Longer working lives make state pensions more affordable. But variations in longevity raise big questions about fairness. A one-age-fits-all policy benefits the better off.

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