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The Institute and Faculty of Actuaries has urged the chancellor to look at recent mortality figures before accelerating the expected rise in state pension age, and to ditch the triple lock at next week’s Spring Budget. The IFoA is also calling for measures to promote green growth.
IFoA president Matt Saker said actuaries are keen to see a clear plan for the state pension from chancellor Jeremy Hunt at his Spring Budget on 15 March.
“We hope this Budget will provide some clarity on how the government will strike a balance between ensuring that state pension provision protects pensioners from poverty and remains sustainable over the long-term,” said Saker.
The government must reassess longevity trends including healthy life expectancy before considering accelerating any planned increase, he argued.
“If, as expected, advances for life expectancy are slower than initially predicted, raising the state pension age... at a quicker rate could have a detrimental impact on the younger generation,” he said.
The IFoA’s Continuous Mortality Investigation recorded 30 consecutive weeks of excess mortality at the end of January this year.
The Government Actuary’s Department and Baroness Neville Rolfe, tasked with a review of the state pension, will produce reports this year that “will provide important data-driven considerations for the future of the state pension”, said Saker.
Steven Cameron, pensions director at provider Aegon, warned that increasing the state pension age to 68 sooner than planned, with the government likely citing affordability.
However, “the higher the state pension age is, the more difficult it will be for some people to remain in work till then, increasing the benefits of offering individuals the option of starting state pension earlier at a reduced level to make it cost neutral”, he said.
As well as the state pension age, the triple lock should be revisited, argued Saker.
“The triple lock has been an important tool in the last decade in helping to tackle pensioner poverty but may now threaten the overall sustainability of the state pension for future generations,” he said.
The IFoA supports a proposal whereby the state pension is increased in line with average earnings only, rather than with the highest of earnings, inflation or 2.5% as is currently the case. State pensions will go up by 10.1% from April because of recent high inflation.
Views on the triple lock differ in the industry. The Pensions and Lifetime Savings Association is in favour of maintaining the triple lock, citing the importance of the state pension for women and other underpensioned groups.
Elsewhere, Saker said the UK could become a world leader on climate-related finance, but that a supportive policy environment has to be in place for this.
“We look forward to the revised Green Finance Strategy due out later this month. We also hope for greater clarity for companies and investors around what is considered a ‘sustainable’ activity when the delayed UK Green Taxonomy is published,” said Saker.
“Together, these are two crucial planks in the wider policy framework that will help accelerate green finance and support the UK’s transition to a net zero economy,” he remarked.