Below is the text of the speech made by Stephen Timms, the then Minister of State for Pension Reform, on 22nd November 2005.
I am pleased to be here this afternoon and let me begin by expressing on behalf of my department by expressing the high value we place on the help and support we have received from the Employers Forum on Age over a number of years – and express our thanks for the partnership which we look forward to continuing for many years to come.
Life expectancy has been going up by two or three months every year for 25 years or more – and there is no sign of that trend flattening off. It is a wonderful transformation which means better life chances for all of us – and it is arguably the greatest achievement of our civilisation. But to make the most of the trend, we need to ensure that older people can continue to contribute for longer to our national life – for their benefit, and also because the economy is going to need them.
The Office for National Statistics has today published its new report “Focus on Older People”. It looks at demography, family and living arrangements, housing, employment, health, lifestyles, income and expenditure and it contains a wealth of fascinating detail. It’s accessible on the ONS website. The rising proportion of older people is very important as a backdrop to the activities of many parts of Government – the report points out that there are 20 million people aged 50 and over today – and John Hutton as Secretary of State will be the chair next month at a dedicated Cabinet Sub-Committee for older people which is going to be leading the Government’s response to the challenge.
I want to set out today our strategy to increase the opportunities for working longer; how we are taking it forward through three separate strands or work. It is a key issue not only for business success but also – as we were reminded last week – for pensions reform.
We published our cross Government strategy for older people, ‘Opportunity Age’, for consultation earlier this year, looking 10 to 15 years ahead. In his introduction, the Prime Minister made the point:
“the reality is that, as older people become an ever more significant proportion of the population, society will increasingly depend upon the contribution they can make.”
The question is how can we realise that potential?
People are now living longer than ever before. And leading healthier lives. They are also spending longer in retirement. In the 1920s when the retirement age of 65, was introduced, the average life expectancy of a man was about 58. Now on average a person reaching the age of 65 can expect a healthy life to the age of 76, with average life expectancy higher still.
Extending working life first objective
The first strand is to remove the barriers to employment for older people and create more opportunities for them to work and save for longer. It has been striking in the National Pensions Debate over these past few months that everyone agrees that barriers to working longer should be removed.
The employment rate for over 50s has risen significantly since 1997. 71% of those aged 50 to state pension age were in employment in Spring this year – and, in addition, over 1 million more people aged over state pension age are in work, many of them part time or self-employed. But we still have a big challenge of over two and a half million people aged 50 to state pension age who are out of work, and we need to be doing better.
Many are out of the labour market for health reasons. Through our Pathways to Work pilots we’re testing better ways of helping people who claim sickness benefits to re-enter the labour market more quickly – and we have seen some dramatic improvements in the pilot areas. The more active approach we have been developing is clearly part of the solution.
We have been looking at how to bring together support from the health service with employment help. One of the Dragon Awards presented each year by the Lord Mayor of London was made last month to a GP practice in Camden which has an employment adviser based in the GP surgery. One of the GPs at the practice commented that the initiative had – and I quote – saved:
“an average of five consultations for every patient that wants to explore the possibility of getting back to work, or wants education and training advice. It has had a significant effect on the mental and physical well-being of patients, … lowered the amount of drugs, largely antidepressants, prescribed to patients [and] helped many people, who have been unwell but are willing to work, to change their lives.”
These types of new partnership are going to be part of the answer.
We know that, as well as the opportunity to work, older people need appropriate skills to work. We’re working closely with the Department for Education and Skills. For example, the New Deal for Skills, particularly skills coaching for people out of work and the Employer Training Pilots for those in work, will enable us to test new ways of improving availability of training needed by individuals and businesses, for the benefit of older people among others.
Extending working life second objective
The second strand is to create a culture change around retirement age and working longer, to tackle discrimination and to encourage positive attitudes to older workers.
Our Age Positive campaign has been tackling age discrimination in employment since 1999.
But more recently the announcement of age legislation prompted a growing call from employers – especially small employers – for more practical information and help. So we invited leading business organisations to work with us on guidance for the coming legislation, and to contribute to a short burst, high profile awareness and guidance campaign, to help employers adopt non-ageist practices in the run up to next October. The Be Ready campaign as it is called aims to change employers’ attitudes to age by challenging traditional views on subjects like occupational health, training, recruitment and retention, and encourage more flexible employment and retirement opportunities.
The Be Ready materials, launched last May, include best practice examples, case studies and research that we’ve developed with many employers to help bust the myths around age. They also contain more in depth guidance on the workforce management practices of Age Positive employer champions and the business benefits they experience. The materials are proving popular and the feedback has been very positive.
In the Spring, we’ll be updating the guidance with more information on flexible working and phased retirement opportunities, together with information about the legislation. Employer Forum on Age is contributing to the guidance with research with employers on their flexible retirement practices and procedures, to take advantage of changes in the pension tax rules from April and in preparation to comply with the new legislation from next October.
EWL and pensions (EWL third objective)
So the first two strands are removing the barriers to over 50s employment and promoting culture change. The third strand to extending working life is providing the incentive, and this we are primarily tackling through changes to the pensions system.
Our State Pension deferral policy has, from April of this year, increased the rewards for people choosing to work whilst deferring their state pension. So if you defer now for a year, then the state pension – that is basic state pension plus SERPS or State Second Pension – are increased by 10%. If you defer for another year, its another 10%. All the research shows that is a pretty attractive package for quite a lot of people – and for the first time there’s the option of taking a lump sum payment instead. We will be working to make those options better known over the next few months.
The tax simplification measures from April next year will mean that, for the first time, where scheme rules allow it, it will be possible to carry on working for the same employer whilst drawing from the employer’s occupational pension scheme. We’ve amended legislation to raise the minimum age at which personal pensions can be drawn from 50 to 55 years by 2010.
In all these areas and across pension reform, our aim in pension reform is to engage in a national debate and to build consensus for a long-term pension settlement. That is not because we want to avoid a row, but because we think that consensus will be tremendously helpful in building the new confidence that we need around pension saving, that we are putting in place a new framework which will endure. We set out our principles for pension reform in February, for a system that tackles poverty effectively and provides opportunity for all to build an adequate retirement income.
The debate will no doubt reach a new and higher level when the Pensions Commission report is published a week tomorrow, and I welcome the wide interest there already is in what the Pension Commission is going to say. We will then want to analyse the evidence and consider the options and recommendations made by the Commission, drawing on the views expressed in the National Pensions Debate and the response which will be made to the Commission report, and respond next year with proposals for reform which I hope will command as broad consent as possible.
To improve radically the retention rates of older workers we need employers to increase the availability of flexible work and retirement opportunities, and so to help retain those at greatest risk of leaving prematurely and enable others to stay on beyond State Pension Age. A combination of active labour market strategies, removal of structural financial barriers and the greater availability of flexible work and retirement patterns will make it possible for a lot of people to stay in work longer and potentially to save for longer.
We recognise there is a need for help in how to retain older workers. I have commended to you the products of our Be Ready campaign. I hope companies will include older workers in all employment practices. Ensure they benefit from the training and promotion opportunities offered to younger staff. Make sure you have policies to manage poor performance and health issues. And be flexible and communicate with your employees. Make them aware that as an employer you value the diversity created by a mixed age workforce and offer alternatives to that cliff edge of retirement.
There are some key steps here to unlocking substantial gains for individuals, for businesses and for the economy as a whole. I hope we can work together as we learn how to make the most of these opportunities over the months ahead.