E-petition relating to the state pension

E-Petition 627603 calls for both a dramatic increase in the level of State Pension, and a reduction in the State Pension age:

The British State pension is far too low. We want the Government to increase the basic state pension to £19,760 a year (£380 a week), and extend this to anyone aged 60 or over. This should lift thousands out of poverty, and give our elderly folk more spending power and help grow the economy.

The Government has responded by saying it “has no plans to increase State Pension to £380 per week or reduce State Pension age to 60.” The full response can be read on the petition webpage.

Level of the State Pension

The Petition calls for the basic State Pension to be increased to £380 a week, or £19,760 a year, extended to anyone aged 60 or over.

The current full rate of the new State Pension – for people reaching State Pension age (SPA) from 6 April 2016 – is £185.15 per week, though they may receive less if they have fewer than 35 qualifying years on their National Insurance record.

For people who reached State Pension age before then, the maximum rate of the basic State Pension is currently £141.85 a week, or £7,376.20 a year. This group could also accrue earnings-related Additional State Pension on top of the basic State Pension, or contract out in exchange for paying lower National Insurance contributions.

Taken in the round, the old and new State Pensions pay broadly similar levels of benefit. The following table gives the most recent figures available for the average (mean) amount of weekly State Pension paid to pensioners under the pre- and post-April 2016 systems.

_{Source: DWP, State Pension statistics from November 2020 to May 2022, Table 11a}

As explained in the Commons Library briefing How benefit levels are set, the State Pension and benefit rates we have today are not the result of any regular, systematic assessment of needs. Nor are they in any way linked to the National Minimum Wage or National Living Wage. Instead, they have _emerged from successive rounds of welfare reform since the Second World War and, above all, choices made at periodic benefit upratings, compounding over time.

More favourable treatment of State Pensions compared with working-age benefits – due to policies including the “triple lock” (which ensures State Pensions rise at least in line with the highest of earnings, prices, or 2.5%) – has meant an increasing divergence over time between the levels of support for pensioners compared with people of working age. The basic amount of Jobseeker’s Allowance for a single person aged 25 or over, for example, is £77 a week – just over half average rate of the State Pension.

_{Note: Real terms analysis looks at the average real value of the benefit at the date of uprating (ie April), in April 2021 prices. The OBR's RPI forecast for 2023 Q1 is used to calculate the real value of 2023/24 rates. Unemployment benefits are standard rates of Unemployment Benefit and JSA.}

_{Source: Library analysis of DWP, Abstract of DWP benefit rate statistics 2021, 22 January 2022; ONS, RPI series CZBH, 16 November 2022; OBR, Economic and Fiscal Outlook – November 2022}

This, amongst other policies, has contributed to falling levels of absolute and relative pensioner poverty over the past quarter century. See the Library briefing Poverty in the UK: statistics for further detail.

The State Pension is not the only source of financial support from the state for people over State Pension age. There is also, for example, means-tested Pension Credit which can act as a ‘top up’ for people of State Pension age on with low resources, as well as Housing Benefit which is also means-tested and helps pensioners on lower incomes with their rent.

Attendance Allowance is non-means-tested and provides help to people over State Pension age with the costs of care and/or supervision needs. Lower income pensioner households may also be eligible for reductions in their Council Tax bills. In addition, there is the Winter Fuel Payment. For winters 2022/23 and 2023/4, the Government is providing an additional £300 to the Winter Fuel Payment.

UK State Pensions in international context

The Commons Library briefing Pensions: international comparisons, compares the UK State Pension with similar systems in Europe and outlines the structural differences in the sources of pensioner income across economically advanced countries.

Comparing pension provision in the UK with that of other countries is complicated by substantial differences in the structure of pension systems across the developed world. Countries differ in the reliance placed on state pension provision as a component of overall pensioner income, and also in the structure, eligibility criteria, and financing of the state pension system.

Comparing state pensions alone shows the UK providing a lower level of pension than most other advanced economies relative to average earnings. The UK devotes a smaller percentage of its GDP to state pensions and pensioner benefits than most other advanced economies (see the table on page 13 of the briefing).

However, the relative position of pensioners in different countries converges if other pension income is included. Income from occupational and personal pensions is a relatively important source of pensioner income in the UK, in contrast to many other countries where state provision (financed either through social insurance contributions or general taxation) is dominant.

State Pension age

The petition calls for a higher basic State Pension to be extended “to anyone aged 60 or over”.

The current State Pension age (SPA) for both men and women is 66. From the 1940s until April 2010, the SPA was 60 for women and 65 for men. It was then increased in the following ways:

• The SPA for women was increased from 60 to 65 in stages between April 2010 and November 2018, to bring it into line with that for men.
• From November 2018 to October 2020 the equalised State Pension age rose from 65 to 66.

Section 26 of the Pensions Act 2014 allows for the further increase to 67 to between 2026 and 2028.

The Pensions Act 2007 also provides for the SPA to increase again to 68 between 2044 and 2046. However, a 2017 review of the SPA recommended this be brought forward to between 2037 and 2039, subject to a further review to be concluded by May 2023.

Periodic reviews

The Pensions Act 2011 accelerated increases to women’s State Pension age, and brought forward the increase in the overall SPA from 65 to 66. These changes gave rise to a long-standing campaign, with some women born in the 1950s arguing significant changes to their SPA were imposed without appropriate notification.

To ensure further revisions in life expectancy were taken into account in a timely and transparent way, the Coalition Government legislated for periodic reviews of the SPA. The Government would conduct reviews, informed by a reports from an independently led body and the Government Actuary’s Department (GAD).

The first periodic review (2016-17)

Although it is not mandated by legislation, in advance of the first periodic review, the Coalition Government committed to the “core principle” that people should spend, on average, “up to one third of their adult life drawing a State Pension”. They also committed to providing individuals with at least ten years notice for any changes affecting them.

The first independent report was produced by John Cridland, who was also asked to consider wider factors such as variations in life expectancy. The final report, published in March 2017, recommended:

• The SPA should rise to age 68 over the two-year period 2037 to 2039.
• The SPA should not increase more than one year in any ten-year period, assuming that there are no exceptional changes to the data.
• If additional savings are needed, the triple lock should be withdrawn in the next Parliament.

The rationale for bringing forward the proposed increase to 68 was to maintain a roughly consistent proportion of adult life spent in retirement, and to strike a balance between spacing out rises and fiscal sustainability. In recognition of the impact of a higher SPA on disadvantaged groups, the review also recommended mitigations for recipients of means-tested benefits approaching SPA.

At same time the Cridland report was published in March 2017, the Government Actuary’s Department (GAD) published a report looking at two alternative scenarios – reflecting receipt of the State Pension for either 32% or 33.3% of projected adult life.

Following the Cridland and GAD reports, the Government undertook its own concluding review, accepting “the key recommendation of the Cridland review and increase the state pension age from 67 to 68 over two years from 2037.” However, in its final report, the Government said that this was a “big decision with significant consequences” and it would therefore carry out a further review before bringing forward the rise in State Pension age to 68. This would enable consideration of the latest life expectancy projections, and allow the Government to evaluate the effects of current rises in State Pension age.

The second periodic review (2021-23)

On 14 December 2021, the Government launched the second periodic review of the State Pension age, with a consultation document published in February 2022. As in 2017, an independent report, this time led by Baroness Neville-Rolfe, and a report from the Government Actuary’s Department will be published, followed by a final report setting out the Government’s proposals. The deadline for this is May 2023.

Compared to data used in the 2016-17 review, more recent projections have not been as optimistic about improving life expectancy. Some commentators have argued that if the Government maintains the principle that people should expect to spend a fixed portion of adult life in receipt of State Pension, planned rises in the SPA should be slowed.

However, unlike for the first independent review, the Government has not committed in advance to this principle or made fresh commitments to fixed notice periods for changes.

The terms of reference for the independent report instead asked Baroness Neville-Rolfe to consider “whether it remains right for there to be a fixed proportion of adult life people should, on average, expect to spend over State Pension age.” Similarly, the consultation document asks whether it is “reasonable to give people a fixed period of notice for State Pension age changes, and if so what period.”

The independent report was completed in September 2022 but has not yet been published.

Background on State Pension ages is discussed in more detail in Library briefing on State Pension age reviews. The Library also has relevant briefings on increases in the State Pension age for women born in the 1950s, and the State Pension triple lock.