Work keeps at bay three great evils: boredom, vice, and need.
– Voltaire –
Despite what Voltaire said, most people still look forward to the day when they can give up work and retire, hopefully with some degree of comfort. Meanwhile, anyone who has seen the news from France may be aware that in the last two months, there has been a series of ‘national demonstrations’ against their government’s plan to raise the retirement age from 62 to 64. At times over a million people have taken to the streets nationwide to protest against this.
There’s an element of déjà vu about all this. The French government’s plans are reportedly the seventh set of reforms since President Mitterrand reduced the retirement age to 60 in 1982. There were similar protests and strikes in 2010 when the age was increased to 62, and again in 2019/20 when the current proposals were first mooted, before eventually being shelved because of the pandemic.
Plus ça change, plus c’est la même chose and all that jazz. At heart, the issue is whether the current pension arrangements are affordable, particularly in light of demographic changes. Fifty years ago in France, there were four workers contributing to the social security system for each retiree; nowadays the ratio stands at around 1.7 to 1 and is likely to fall further in the future.
These demographic changes and the question of affordability are of course not restricted to France.
Au contraire they are common across the developed world. The UK government has already increased State Pension Age to 66 and the proposed increase to age 67 has been brought forward and is scheduled to take effect from 6 April 2028. A further increase to age 68 is planned for 2046. Although there were protests in the UK against the proposed reforms these were nowhere near the scale seen in France and a legal challenge through the courts was ultimately unsuccessful.
At the same time, the ‘normal minimum pension age’ for occupational and personal pension schemes in the UK is also changing. The minimum age at which pension scheme members may draw their pension, other than on ill-health grounds, will increase from age 55 to age 57, also with effect from 6 April 2028. Thereafter the intention is for normal minimum pension age to rise in line with future increases in State Pension Age.
There is an exception where scheme rules provided members with an unrestricted right to draw their benefits at an age earlier than 57. However, for this to apply individuals must either have been a member of the scheme by 4 November 2021 or, have applied to transfer their benefits into the scheme by that date. Since many schemes may simply have referred to the statutory definition of ‘normal minimum pension age’ rather than specifying an age, or in the case of an occupational pension scheme require employer and/or trustee consent to early retirement requests, how many schemes will have a protected minimum pension age lower than age 57 is another question.
Recently there have been suggestions that to make further savings the government may be considering bringing forward the increase in State Pension Age to age 68 and implementing this by 2039; increases beyond that to age 69 or even 70 have also been proposed from time to time. Such changes could even potentially be announced by the Chancellor of the Exchequer, Jeremy Hunt, in next month’s Budget. Very much the issue du jour, but the government is also understood to be concerned at the number of people in their 50s who have left the workforce since the pandemic began, largely due to early retirements. There have also been suggestions that measures are needed to persuade them to return to work or (and in the spirit of Voltaire) pour encourage les autres to remain in employment, including potentially making pension commencement lump sums taxable.
Such measures are likely to be highly unpopular. Far from being an army of bon vivants, many of these early retirees have left work due to long-term illness and/or are accessing their pension to ensure that they’re receiving an income in straitened times. It’s questionable whether any UK government has carte blanche to make these changes, especially now during the current cost of living crisis, or for that matter, whether the electorate would be so blasé as to accept these without question. Indeed, such a move ahead of a general election could well be a faux pas.
What would Voltaire have thought? Perhaps he gave the best advice when he wrote to a friend, “I advise you to go on living solely to enrage those who are paying your annuities. It is the only pleasure I have left.”