The map that shows Britain’s state pension divide
A special state pension age for manual labourers would spark a new retirement divide in Britain, experts have warned.
The current state pension age is set at 66 and is in the process of rising to 67. For many, it is the earliest age they can retire.
However, manual labourers with deteriorating physical health are often not able to work up to this age.
An “early access scheme” could allow these workers to receive their state pension younger, at a reduced rate, under proposals set out in an independent report on the state pension age published this week.
It would mean professionals and office workers waiting relatively longer for their state pensions.
The report, led by Baroness Lucy Neville-Rolfe, said: “This could include individuals aged, say, 65 and above and with 45 years of National Insurance contributions or equivalent and should aim to help those who have performed physically demanding roles over many years.”
A special state pension age would also benefit those who joined work straight after school, the report found.
Under the current system, people in wealthier areas receive more in state pension payments over their lifetime, thanks to a longer life expectancy. However, a tiered system could reverse the disparity, creating a new imbalance between those in the North and South, experts have warned.
This is because people in Scotland, Wales and the north of England typically live shorter lives, with a higher proportion of jobs in manual labour. In contrast, professional service industries are concentrated in London and the South East.
Steven Cameron, of the pension provider Aegon, said it would be a "disaster" if the policy handed early state pension ages to areas where manual labour, and lower life expectancies, were more common.
“It would be an absolute disaster if people in Glasgow get their state pension earlier than those in London,” he said. “That would not be seen as fair by anyone.”
A fairer policy would be to introduce an early-access age for everyone, regardless of their career history, Mr Cameron said.
“It takes away the subjectivity of what might qualify as a physically demanding role,” he said. “You might think of a bricklayer first, but nursing jobs too often require physical strength.
“People also do not stay in the same job for their whole lives – what if you have worked in manual labour for 20 years, and then in a call centre for the next 15?”
Mr Cameron added that the Government already allowed people to defer their state pension in exchange for higher payments. “Why not flip that over and allow people to take it at an earlier, reduced rate instead?” he said.
The Government said that a universal state pension age was a clear signal to those planning for retirement, but that it would keep the position of those unable to work up to this age “under review”.
The report comes as the Government faces growing pressure to control spending on pensioner benefits. Next month, the state pension will rise by a record 10.1pc, pushing the full new state pension past £10,000 per year for the first time. The increase is expected to cost the Treasury an extra £11bn.
Baroness Neville-Rolfe also recommended that spending on the state pension should be capped at 6pc of gross domestic product. It currently accounts for 4.8pc of GDP, but is expected to surpass 6pc in just three decades.
A cap would force the state pension age up to 69 by 2048, the report found. However, the Government has said that the cap, if met through state pension age rises, could disproportionately impact those with lower life expectancies, and should be considered more fully.