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Dhhs Note On Costs Of Reducing Minimum Pension Age For Men

Volume 13: debated on Thursday 19 November 1981

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Revised estimates of the cost of lowering pension age for men are set out below. It is estimated that the net cost to central Government funds for a full year would be of the order of:

Reduction of pension age to6463626160
Cost £ million4008001,2001,9002,500

These costs are based on average 1981–82 benefit levels and assume that the reduction in age is introduced, is fully operational in all respects and that retirement behaviour has fully adjusted in that financial year. It has also been assumed that the numbers of men who defer retirement would be higher than is presently the case amongst men aged 65 to 69 years, that only two-thirds of the jobs vacated by men retiring earlier would be actually filled and that of those jobs filled only three-quarters would be filled by persons on the unemployment register.

The assumptions on job replacement can only be approximate, but on balance it seems reasonable to assume that not all the vacancies caused by early retirement would be filled because some employers would probably use the opportunity to slim their work force through natural wastage and that some of the vacancies would be likely to occur in a locality where there were no qualified people to fill them. Moreover, although it is assumed that all those retiring would be men, their retirement might result in a vacancy being filled by a married woman or another person not actually registering for employment. There can obviously be no precision in such broad brush assumptions, but the assumptions adopted are those considered to be most realistic.

It may be helpful also to illustrate the effect that the assumptions about job replacement have on the estimate. For example, on the one hand, if it were assumed that there were no job replacement whatsoever, as would be the case in a situation of full employment, then the costs would increase considerably and be in the region of:

Reduction of pension age to6463626160
Cost £ million5009001,6002,5003,400

On the other hand, if it is assumed that there would be full job replacement and that every vacancy occasioned by early retirement was filled by someone from the unemployment register already in receipt of social security benefits, then the net costs would reduce and be in the region of:

Reduction of pension age to6463626160
Cost £ million3006001,0001,4001,900

These estimates are also sensitive to the numbers of men aged 60–64. There will be significant changes in these numbers over the next few years.

The estimates take account of the net increase in public expenditure—in the extra costs of pensions less the savings in other national insurance benefits and supplementary benefits—as well as the net loss of national insurance contributions and surcharge, National Health Service, redundancy fund and maternity pay funds income, and a broad estimate of the change in income tax revenue. The estimates relate solely to the net cost to central Government funds and take no account of the financial implications for occupational pension schemes.