§ Lady Olga Maitland (Sutton and Cheam)I propose to discuss an age-old problem—when are we officially old? In this age of equal opportunity and equal treatment for all, is it fair that a man can be deemed old at 65 and thus eligible for a state pension, but a woman is considered so old at 60 that she can skip a five-year wait and collect her pension then?
I have absolutely no intention of retiring at 60. That is barely 12 years from now. I must inform my constituency that I have every intention, barring illness, of carrying on working at least until 2017, by which time I will be a sprightly 73-year-old. Without giving away any secrets, I might point out that the House already has some splendid, lively women Members around their seventies. Like old soldiers, they show no signs of fading away, so hon. Members have been warned.
The reality is that we are mentally and physically delaying our aging process. We have better diets, healthier foods, more exercise and improved medicines, so much so that today there are 2,500 people alive who have celebrated their 100th birthday. A considerable number go on to celebrate their 105th birthday, and even their 110th. Most of those people are women.
Life expectancy for those born in 1841 was less than 40 years for a boy and 43 years for a girl; indeed, many children died in infancy. By 1941, life expectancy was 70 years for a boy and 75 years for a girl. I am happy to report that 50 years later there has been a dramatic increase. A son born in 1991 can expect to live to 76 and a daughter born in the same year will, on average, live to about 81 years of age. In other words, people born today can on average expect to live about six years longer than those born 50 years ago. That justifies the proposition that women form what I call the first estate. We are tougher, more resilient and more active. I should make another plug: we are harder-working.
Is it right, therefore, that women should be pensioned off at 60? The timing for paying retirement pensions has varied over the century. When pensions were introduced in 1908, they started for both men and women at over 70. In 1925 the age went down to 65. However, the pension age for women was lowered to 60 by the Old Age and Widows' Pensions Act 1940. The new inequality was a response to a campaign in the 1930s by unmarried women, many of whom had cared for dependent relatives for most of their lives. It also recognised the fact that, on average, married women were several years younger than their husbands. It must also be admitted that the Government hoped that lowering the age would be a sweetener to encourage more women to work in war factories. That was blatant sex discrimination, but the level has rested there for 50 years without change.
Today, the average woman is mortified to think of herself as old at 60, yet the state does. The time has come to think the unthinkable: raise our retirement age to that of men—65. It would be fairer and would not be breaking new ground, only restoring a former status quo.
More than that, the time has come to recognise that, with rising numbers and their survivability, women are putting an enormous strain on the rapidly diminishing working population which must sustain them. I congratulate the Leader of the House on having the 687 courage, when he was Secretary of State for Social Security, to raise the issue in his document, "Options for Equality in State Pension Age." He broke new ground by saying that the question today is not whether we should equalise the retirement age at 65 but how and when. The case is powerful.
The number of people over state pension age will increase significantly from 10.3 million in 1990 to a projected 13.3 million in 2050, peaking at 14.4 million in 2034. The peak in the number of pensions is caused by the aging of those born during the 1960s baby boom, which will lead to a corresponding increase in the number of people who will reach state pension age in the third and fourth decades of the next century. At the same time, the population of working-age people—the so-called support ratio—is expected to fall. All that will put added pressure on the social security budget, which is already the largest single item in public spending.
In short, can we possibly expect and demand that a much smaller work force should bear such a burden? Is it realistic to expect every pensioner aged 60 in 2010 to be supported by only 2.6 workers, whereas women, who are a much fitter generation now, would be supported by a wider and fairer spread of four workers if they waited until 65? As I said, the peak will be reached about 2030—I will be 86 and still going strong—and three people will be needed to support each pensioner, even at 65.
Let us turn to the European dimension. Our problems are not unique in squaring up to the matter. Others also have to adjust their state pensions. Many European Community countries have already moved towards equalisation. Germany plans to have a common pension age of 65 by 2012, when every pensioner will be supported by barely two workers. Italy will equalise at 65 by 2016. By that time, 2.4 workers will be needed to support retired people. Having gone against the trend and opted for retirement at 60, France has recently reopened the question.
We are all faced with the combined effects of low birth rates and increasing life expectancy which serve to slow the population growth rate and increase considerably the proportion of elderly people. In Britain, the proportion of people over the age of 65 is expected to rise from 14.9 per cent. in 1980 to 20.4 per cent. in 2040. In comparison, the proportion in France, which is starting from a lower base of only 14 per cent., is expected to rise to 22.7 per cent. in 2040. The proportion of people aged 65 or more in Japan will more than double in the next 40 years.
Some European countries have already seized the nettle. In Norway, the pension age of 67 applies to both sexes. Other Scandinavian countries and Cyprus have an equal state pension age of 65. Recognising similar trends, the United States has introduced a reform package to be implemented in stages between 1983 and 2027. Over the period 2003 to 2009, the pension age will increase to 66, and from 2021 to 2027, it will increase to 67.
There is more than one way of tackling the problem. We could use the much-favoured "flexible decade" system. But I do not believe that that is realistic. It sounds attractive. Everyone would be satisfied, so they think. People would choose their retirement age over a decade—say between 60 and 70 or 55 and 65. The attraction is that those who are fit and wish to remain happily at work until they are 70 or so would earn an additional pension when they retired. Those who wished to retire at the earliest opportunity would be able to do so, but clearly on 688 less income. On that score, the system could create problems. I appreciate that Sweden operates flexible decade retirement, but Sweden has a different culture and a different social security system. It does not bear direct comparison with Britain.
Alternatively, we could reduce the male pension age to 60, in line with women. Or we could split the difference and opt for 63. Or we could raise the pension age for women to 65. It has to be said that 60 is no longer the most realistic option. It would cost the Exchequer at least £3.5 billion a year, at current prices. It would fly in the face of international trends, which are mainly upwards.
The choice facing us and the decision-makers is simple: either we give extra money to men by reducing the male pension age from 65, or we make savings from women by increasing the female pension age from 60. Equalisation at 63 brings neither joy nor tears. There is no real gain either way. The economic effects are pretty neutral and little would be achieved.
However, a common pension age of 65 would bring savings of at least £3.5 billion a year. That would be enough to cut 3p in the pound off income tax. That must be a mouthwatering prospect for our Treasury Ministers. My guess is that the common pension age of 65 would be the most attractive proposition. Not only will the pension age be fairer, but pensions will no longer be a drain on the economy. More than that, the common pension age could bring real dividends, ensuring that the released money could be diverted and targeted to those most in need, for example, the very carers who look after the frail and elderly. None of the other options remotely offers this remedy and help.
Such a programme, on a considerable scale, involving women born in the 1950s will take adjustment. It will take at least 15 years to phase in. The first women likely to be affected by the full impact of the change would have been born in 1954 and will reach the new pension age of 65 in 2019. The full impact of the change would hit women now under 40. It is not a programme to be launched in haste. It will have a fundamental effect on society. Many women will be delighted to be able to continue working on the same basis as men.
We spend all our lives seeking equal treatment and status. There is no reason why retirement should be any different. However, we should not forget to take into account the women who have spent years in low-paid work, from which they may not qualify for a retirement pension and who do not have an occupational pension. Perhaps they have heavy home caring responsibilities. Such women could be forced to seek income support before they reached the official retirement age. I know, from the feedback that I have had, that they would regard this as demeaning.
We should examine carefully how vulnerable groups would be affected. We should be aware of the women who could be disadvantaged. They should be protected and compensated where appropriate. Of course, the other side of the coin is that, with the decline in the working population, there will be more demand for senior citizens to work and be recognised for all their skills and experience. At long last, the "Oldies", as signified by the satirist Richard Ingrams, will have the last word. The able-bodied are vibrant, alive and extremely well. It would be a great pity if we did not take advantage of that talent.
689 Agism, as far as I am concerned, has spun out of control. The great god youth will now be focusing on its seniors and appreciating them for their own worth.
I very much hope that more thinking will develop along these lines. The pensions field is a daunting area of social policy, the numbers involved are very high and the financial calculations are highly complex with so many pensions to be juggled around. This debate has been going on now since 1991. For two years, we have been airing these matters. We should now initiate, I believe, a comprehensive public information campaign and condition ourselves to these fundamental changes.
I congratulate the Social Security Advisory Committee, the independent body set up by the Government, on drawing on 4,000 comments and contributions from individuals, companies and organisations. Of these, there were 22 major ones, and it is interesting to look at the breakdown: 13 of them recommended pensions for all at 65, only one wanted retirement at 63, and just five sought a full basic pension at 60. I note, too, that the Labour party chose not to make any contribution or submissions at all to the DSS, although I understand that it is not averse to re-examining the issue.
I believe that the time has come to take the brave step and bring women's pensions up to date. The urgency is clear to all of us and it is my sincere hope that the Minister will give us some guidance on Government thinking.
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§ Mrs. Llin Golding (Newcastle-under-Lyme)I congratulate the hon. Member for Sutton and Cheam (Lady Olga Maitland) on obtaining this very important debate. I listened with interest to her views and I have to declare an interest: I am a little older than she is. However, most of the women in my family live well into their 90s, so I have a long way to go yet.
I hope that the hon. Lady will forgive me for not commenting in detail on her interesting, if somewhat single-track, argument, enabling her to arrive at her conclusion tonight. She may be aware that the Labour party is consulting widely on this complex subject of the equalisation of pension age. There is much to discuss, as I am sure that the Minister will be telling us when she responds to the debate.
The Government intend, I believe, to bring forward a proposal some time later this year and the Opposition look forward to debating the issue. I am sure that the hon. Lady will have much to contribute. She has obviously done a great deal of research on the subject and I look forward to hearing her views. As I have said, I hope that she will forgive me if I do not take this opportunity to reply to her in detail tonight; I intend to keep my powder dry, but I look forward to debating the matter with her at a later date.
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§ The Parliamentary Under-Secretary of State for Social Security (Miss Ann Widdecombe)I, too, congratulate my hon. Friend the Member for Sutton and Cheam (Lady Olga Maitland) on obtaining this debate. With not only Britain but the rest of Europe now facing major demographic challenges, my hon. Friend is quite right to 690 invite the House to consider future patterns of retirement and their effect on generations of both workers and pensioners to come.
The Government, as my hon. Friend has said, in the person of my right hon. Friend the present Leader of the House, then Secretary of State for Social Security, announced in June 1991 that we would equalise state pension age, and our manifesto at the last election reaffirmed that commitment. But we have not yet taken a decision on how we intend to achieve equalisation. We are, as my hon. Friend pointed out, considering four basic options, these being retirement age at 60, 63 or 65, or a flexible period, often referred to as a flexible decade. As I said, we have not taken a decision among those options, and it would be wholly improper for me to speculate on future legislation.
The 4,000-plus responses to the consultation document that we issued in December 1991 and the large volume of correspondence received by hon. Members demonstrate the public interest in the matter, and my hon. Friend's speech is a most helpful contribution to this wide debate.
My hon. Friend has referred to population changes forecast in Britain over the next few decades. She is right to predict a large increase in the number of elderly people. Since it has become fashionable to declare our interests tonight, it would appear that I have rather longer to wait for retirement age than my hon. Friend or the hon. Member for Newcastle-under-Lyme (Mrs. Golding).
As the national insurance fund works on a pay-as-you-go basis, whereby today's workers pay today's pensions, the support ratio is fundamental to our thinking about pensions and retirement. It is therefore worth taking a few minutes to examine that ratio.
Throughout the industrialised world, people are living longer, healthier lives. As a result, an increasingly large proportion of the population are over the existing state pension ages. Our consultation document noted that, in 1990, there were on average 3.5 people of working age for every retirement pensioner in the United Kingdom.
Assuming that no change were to be made in state pension age arrangements, that ratio would drop to 2.5 to one by the year 2030. As my hon. Friend pointed out, the fewer workers there are supporting each pensioner, the more each will have to pay to maintain the same level of pension.
Since the publication of the consultation document, the Office of Population Censuses and Surveys has issued fresh population projections for the next century. They show an even more marked increase in the proportion of people over state pension age.
We had previously estimated that there would be 11.3 million pensioners by the year 2010; we now calculate that there will be 11.7 million. We had previously estimated that there would be 14 million people over state pension age by the year 2030; we now calculate that there will be 15.5 million. Again assuming pension age status quo, the support ration would drop to 2.2 people of working age per pensioner by 2030.
As my hon. Friend pointed out, those changes are not merely a British phenomenon. In the EC, 19.2 per cent. of the population, or 61.9 million people, are over 60. By 2010, that will rise to 23 per cent. Although we should not take it as an indication of what Britain will do eventually, because we have not yet taken a decision, we should be aware of how Europe and the industrialised world are responding to that phenomenon. My hon. Friend 691 provided some Information, and I can add that Denmark and Norway already have a state pension age of 67, the United States is moving towards 67, Germany is moving up to 65, Japan and Italy are increasingly their state pension age, and Austria has equalised state pension ages at 65.
The problem is recognised by the European Commission. In a recent report on Communitywide retirement age policy, it noted:
radical changes in the demographic situationwill have a major impact onthe balance between resources and expenditure in social security sytems".Any country must take into account for the future the necessity and the moral imperative of providing for a sound pension system that guarantees security in retirement. It must also take into account the equally compelling necessity and moral and practical imperative to achieve that without placing an unacceptable burden on the workers of that time.When we come to resolve that question, we will face the awesome responsibility of handing to future generations a solution to the question of state pension age that must stand the test of decades to come. Any costs or savings will be largely borne or enjoyed by future Governments, not by this Government. The policies that we hand to those of the future must be sound and safe. Costs or savings of between £3 billion and £4 billion are not prospects that we can treat lightly. Our discussion document sets out our calculations in respect of all our options, between which we have yet to choose.
The debate has placed much emphasis on the increasing numbers of the elderly. However, the wider debate develops, I would make one strong appeal: we should not regard our elderly as a burden, but a resource. We must surely all be grateful that we are living longer, healthier, more active lives. I for one will rejoice if the number of pensioners enjoying greater longevity and medical advances grows even more than we already predict.
The one thing that I cannot undertake to equalise is the imbalance of longevity between men and women, but both 692 sexes now enjoy increased life expectancy, which we welcome. The use of those years over the age of 60, whether in remunerative or voluntary work or actively enjoyed retirement, is the subject of increasing study and interest. It is in that positive vein of not always associating advanced years with absence of contribution to the common good, while at the same time recognising every citizen's right to security and rest at the end of his or her working life, that I have addressed the issues raised by the debate.
It is also important to consider the necessity of not always confusing state pension age with an individual's retirement age. The state pension age is the age at which someone becomes entitled to the state retirement pension, but retirement age is the age at which a worker chooses to retire. For many workers that may be a different age from the pension age. Retirement age depends on a number of factors relating to the employment situation and individual choice. It is not something that can be imposed by the Government and it is not something that the Government, in sorting out state pension age, will seek to impose on individuals. We believe, however, that those who wish to remain in the labour market beyond state pension age should be encouraged and enabled to do so.
My hon. Friend the Member for Sutton and Cheam referred to the option of a flexible retirement. We are studying that along with the other options, and we have not yet reached a final conclusion on it. My hon. Friend is right to say that, faced with a choice of retirement ages, many might choose to retire early on reduced state pension, which would, of course, then involve a future Government in heavier income-related benefit expenditure. That option, like others, has attractions as well as drawbacks. I assure the House that, when we come to choose among the four options, which we are studying closely, we will bear in mind the points made in tonight's debate and in the wider debate.
My only regret tonight—I am making a carping point—is that we have not had much of a contribution generally from the Opposition.