13 Feb, 2017
Brexit migration cuts could push state pension age up
Brits may have to work longer if immigration is halted in the wake of Brexit, cautioned a Government state-pension adviser.
John Cridland, an ex-CBI director reviewing the state pension age for the Government, said the “Brexit Factor” had made the future of the state pension uncertain. Changes to state pensions due in May are to be advised by Mr Cridland’s report which will be released a month prior.
According to Mr Cridland, new calculations reveal a “hard Brexit” in which migration is greatly reduced, could push up retirement ages, potentially forcing people to work into their mid-70s. Mr Cridland’s upcoming report will be based on the most recent Office for Budget Responsibility predictions, which do not take Brexit into account. This means that while the report will be relevant, it might become outdated quickly.
Despite this, Mr Cridland told onlookers at an International Longevity Centre conference that the future percentage of pensioners to working age people – a prime aspect affecting the cost of the state pension – was now “unpredictable”. He then went on to say that the unpredictability was due to three factors: life expectancy, fertility and post-Brexit migration policies.
Forecasts calculated by analysts at Hymans Robertson show a “hard Brexit” could possibly result in the state pension age needing to be raised by 18 months for those currently under 40.
The figures are based on estimates done by researchers at King’s College London which assume that national insurance number registrations by migrants will fall from around 600,000 to 140,000 in three years after an “extreme” Brexit migration policy. Eventually this would lead to over a million fewer under 70 paying the pensions of over a million more over 70.
Prof Sarah Harper, director of the Oxford Institute of Population Ageing, said: “The state pension may well have to be revised and this will come as a nasty surprise to many.”
Law firm Eversheds Sutherland, which is researching the effect of Brexit on the state pension age, has warned that if the Government does not raise the state pension age amidst falling migration, it will need to raise taxes instead.
Director at the firm, Francois Barker said: “All the signs are that Brexit is likely to reduce the number of people of working age coming into the UK from the EU and, unless this shortfall is made up elsewhere, the UK’s old-age dependency ratio looks set to rise even further than currently projected.
"This may force the Government to increase state pension age, reduce the rate of the state pension or raise taxes.”
A spokesman at the Department for Work and Pensions stated: “We are committed to reviewing the state pension age each parliament and take into account the most up to date projections at the time.”
Today's News - Co-op Bank for sale amid 'significant' incoming losses