What does falling life expectancy rates mean for state pensions?

Life expectancy at birth fell bit different rates across the regions of the UK

Average life expectancy at birth dropped by 7.8 weeks in England and 11 weeks in Scotland between 2018 and 2020, according to data from the Office for National Statistics (ONS).

The pandemic appears to be the reason for the sharp fall, which has seen “significant reductions” in life expectancy in comparison to the 2015-2017 period.

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There was a fall in life expectancy across the majority of areas in England, although not by the same amount in each region.

Large drops in male life expectancy at birth were seen in the North East (16.7 weeks) and Yorkshire and The Humber (8.8 weeks).

For women, life expectancy was down in the West Midlands (9.9 weeks) but up significantly in the South West (17.7 weeks).

Tom Selby, head of retirement policy at AJ Bell, comments: “After decades of near constant improvements in UK life expectancy, the COVID pandemic has – for the time being at least – dramatically reduced how long most of us might expect to live on average.”

“These life expectancy falls have not been spread equally across the country, however. In fact, while males born in the North East have experienced a staggering 16.7 week fall in average life expectancy, males born in the South West have actually seen a 5.7 week life expectancy improvement.”

The figures have led to questions being raised over what the implications are for state pensions.

“These significant reductions in average life expectancy will inevitably heap pressure on the Government to rethink the planned hike in the state pension age from 66 to 67 in 2028,” says Selby.

The vast differences in life expectancy in different parts of the UK could reignite the debate around the flexibility of the state pension system.

“The current framework means you cannot access the state pension until you hit state pension age, meaning those with lower average life expectancy can expect to receive less from the state in retirement on average. One idea often floated is to allow people to access their state pension early but at a reduced rate. This could help certain groups who might expect to live less long, although care would need to be taken not to heap more complexity onto what is already a complicated system.”

“Given the catastrophic impact COVID has had on all of our lives – and in particular to life expectancy – it makes sense to begin this debate now. State pension age changes have been planned for a long time and were designed to reflect longer-term improvements in life expectancy.”

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