State Pension Age review due before 7th May 2017

GibbsRule_No3

I wonder if the early wartime diet that most of the old codgers, who are living longer endured, could be the reason they are living longer and that today's lifestyle, even with the advance in medicine will soon bring it down again?

Teaandscones

kidmugsy wrote: »

On several threads a few years ago I said that it was foolish to take it for granted that life expectancy was bound to keep increasing. I was accused of being .... I can't remember what exactly, but the thrust was that I must be a madman; how dare I question the unthinking consensus that trends never end?

It's always cheering to remember the words variously attributed to Robert Conquest or Kingsley Amis: "I told you so you effing fools".

Forgive the bowdlerisation.

Apart from a few blips related to war and spanish flu, that has been roughly the case since the 1840's, but there is the possibility that obesity may halt that and help pension fund solvency. We won't know for some years but the US should give a good early indicator.

It was Kingsley Amis giving his review of (his friend) Conquest's book on Stalin's terror regime.

SnowMan

kidmugsy wrote: »

On several threads a few years ago I said that it was foolish to take it for granted that life expectancy was bound to keep increasing.

Essentially predicting future changes in mortality is not something that can be done. It's a bit like trying to come up with a long term weather forecast.

There are so many different factors, known and unknown that could affect things. When you have what are essentially complex adaptive systems like this then anything is possible. There are some scenarios and trends that are more likely than others, but nothing can really be ruled out.

The ONS projection assumptions relate to past mortality improvements continuing, with an attempt to adjust for factors that have caused improvements that won't repeat.

So the formulaic approach of setting SPA, bizarrely is related to a guess that mortality will continue improving and at a similar rate to how it has (and it is that assumption that drives everything)

I don't think they made any major changes to the future assumptions in the 2014 projections (although I haven't looked at that carefully enough to be sure of that), but because the projections are based on percentage improvements to individual mortality rates at individual ages, the slight increases in experienced mortality rates in 2014 vs 2012 at individual ages (over those assumed) affects the calculations and therefore materially changes SPA under the formula approach.

Incidentally since I posted, Towers Watson have posted up the following very informed analysis and mentions the decision to use half allowance for the 2012 and 2014 assumptions 'on the basis that there is not enough evidence that the 2014 figures point to a sustained slowdown in mortality improvements'

https://www.towerswatson.com/en/Insights/Newsletters/Europe/benefits-hot-topics/2017/Cridland-proposes-accelerating-SPA-increase-to-68


I mentioned in an earlier post that the Pensions Minister had commissioned the Government Actuary's Department to come up with projections based on people spending 32% of their adult life in retirement rather than 33.3% which was an indication that the Government wanted to bring forward the SPA increase to age 68 faster than that indicated by the 2014 projections.

The Government could use a percentage lower than the 33.3% to justify faster rises in SPA. However that might be picked up by the Government's opponents as an arbitrary way to bring forward the increase in SPA to age 68.

So probably 'better' for the Government to hide the arbitrary increase through a carefully selected choice of mortality projection, and the Cridland report helps them do that. No doubt they will also say that they could have gone for even faster SPA increases by using a percentage lower than 33.3%.

zagfles

SnowMan wrote: »

The report also seems to recommend that when SPA does go up to 68 that pension credit should still be claimable from age 67, which seems sensible.

Only for long term carers and people unable to work because of ill-health.

A generic ability to claim PC at a year below state pension age would cause all sorts of unfair anomilies. For instance, what if someone was in a generous public sector scheme with a £20k pension at SPA (NPD is tied to SPA for most public sector schemes now). Would they be able to get PC at 67? Or would their workplace pension count as notional income because they could take it early with an actuarial reduction? I don't believe pensions before NPA count as notional income now.

What about someone else in a less generous private sector scheme of say £10k pa, but with a NPA of 65? Would they miss out on PC at 67 just because they get a far lower pension earlier?

What about someone with £400k in a SIPP? Would they be expected to draw it at 67? While someone with a more valuable DB scheme and a NPD of 68 would be able to get PC? Or would the person with the DB scheme be forced to accept the actuarial reduction?

zagfles

kidmugsy wrote: »

Early in adult life I had a spell when I read quite a bit of social science research. It was mainly dismally bad stuff, leaving me with a low view of the intellectual rigour, intellectual firepower, and intellectual consistency of social scientists.

That is to say, I decided that on the whole they were lazy, dim and dishonest. Amazingly, the man on the Clapham omnibus had reached this conclusion without devoting any time to studying their literature.

Yes, as per the discussion above from a year ago. A lot of their research appears to be politically motivated, or feeds the confirmation bias of the researchers or those that set the terms of reference.

For instance, as the Cridland report highlights, there's a definite correlation between poverty, ill health, smoking, drinking to excess, and obesity. Loads of research will show this correlation. But correlation does not prove causation. Yet there usually seems to be an underlying assumption that poverty is the cause, rather than poverty simply being a symptom.

SnowMan

zagfles wrote: »

Only for long term carers and people unable to work because of ill-health.

A generic ability to claim PC at a year below state pension age would cause all sorts of unfair anomilies. For instance, what if someone was in a generous public sector scheme with a £20k pension at SPA (NPD is tied to SPA for most public sector schemes now). Would they be able to get PC at 67? Or would their workplace pension count as notional income because they could take it early with an actuarial reduction? I don't believe pensions before NPA count as notional income now.

What about someone else in a less generous private sector scheme of say £10k pa, but with a NPA of 65? Would they miss out on PC at 67 just because they get a far lower pension earlier?

What about someone with £400k in a SIPP? Would they be expected to draw it at 67? While someone with a more valuable DB scheme and a NPD of 68 would be able to get PC? Or would the person with the DB scheme be forced to accept the actuarial reduction?

Fair point.

It is hard to say how this would be implemented in practice and not a decision that is likely to be taken now.

Under pension credit rules notional income from untaken DC pensions is allowed for from pension credit age so your 400K SIPP person wouldn't be eligible (because I am assuming pension credit age is 67 and SPA is 68 in my over-simplification of the recommendation)

The report mentions this ability to claim means tested benefits at 67 would apply for long term carers and people unable to work due to ill health, but also suggests that the conditionality requirements could be loosened for universal credit as people approach retirement to require only some level of part-time working.

The report actually implies the top up to those who did qualify for this means tested top-up from 67 to 68 would be less than the pension credit amount.

The more you read the detail of the report, the more you realise how minimal the suggested support is for those who aren't able to continue in work to age 68

zagfles

SnowMan wrote: »

Fair point.

It is hard to say how this would be implemented in practice and not a decision that is likely to be taken now.

Under pension credit rules notional income from untaken DC pensions is allowed for from pension credit age so your 400K SIPP person wouldn't be eligible (because I am assuming pension credit age is 67 and SPA is 68 in my over-simplification of the recommendation)

The report mentions this ability to claim means tested benefits at 67 would apply for long term carers and people unable to work due to ill health, but also suggests that the conditionality requirements could be loosened for universal credit as people approach retirement to require only some level of part-time working.

The report actually implies the top up to those who did qualify for this means tested top-up from 67 to 68 would be less than the pension credit amount.

The more you read the detail of the report, the more you realise how minimal the suggested support is for those who aren't able to continue in work to age 68.

Yes, and changing the UC conditionality requirement to part time wouldn't provide most people with any benefit, except those who rent, since even 20 hours at NMW would eliminate UC for most.

But if they did this it could be the first stage towards applying UC to pensioners - rather than current benefits with a much higher applicable amount. The way benefits work currently - with pensioners getting over double the applicable amount of working age people, does act as a disincentive to save for retirement for people who rent.

kidmugsy

Teaandscones wrote: »

Apart from a few blips related to war and spanish flu, that has been roughly the case since the 1840's

Yeah, yeah, and trends never end and therefore ....

My objection wasn't to the assumption that the trend would continue, but to the sheer stupidity of assuming it must, must, must continue. Indeed some dimwits wanted to assume that the trend must not only continue but must continue at the same rate.

It comes to something that people can be so stupid as to deny that we don't know what the future holds. Just another modern superstition, I suppose.

SnowMan

http://www.actuarialpost.co.uk/article/life-expectancy-is-falling-as-state-pension-age-set-to-rise-10860.htm

MPD

zagfles wrote: »

For instance, as the Cridland report highlights, there's a definite correlation between poverty, ill health, smoking, drinking to excess, and obesity. Loads of research will show this correlation. But correlation does not prove causation.

If you smoke 20 a day, go to the pub every night and have a takeaway on the way home there will be little money left over. On the other hand you will probably see very few years after SPA.