Raising the state pension age (SPA) alone will not address challenges caused by an ageing population, according to the Centre for the Study of Financial Innovation (CSFI).
The government is set to increase the SPA to 66 this year, 67 by 2028 and 68 by 2037-39, to balance pension finances, while maintaining the aim of people spending up to one third of their adult life in retirement.
The centre's joint report with Schroders and Cass Business School titled The Dependency Trap: are we fit enough to face the future? argued the government should instead support an ‘active ageing' environment, which would improve health and economic activity among those aged over 50.
This would raise lifetime earnings and saving levels, as well as provide the tax revenues needed to fund state benefits.
According to the report, active participation in the workforce starts to tail off when people reach 50, with ill health, or disability.
This means the dependency ratio - the number of people aged 20-64 compared with those aged 65- plus - would deteriorate from more than three times to just over two times if nothing were done.
Author of the report, Cass Business School professor of statistics Les Mayhew said:
"The government's response has been to raise the SPA. Yet, it has also encouraged people to expect to spend up to a third of adult life in retirement. If you take into account the impact of disability on dependency, the SPA might need to rise even faster than currently proposed, which would bury the one-third ideal.
"This would not be necessary under the ‘active ageing scenario', which would raise the overall activity rate of the working-age population from 80% to 85%. Most importantly, the improvement could largely be achieved if just one in six of those aged over 50 who are now inactive were in work.
He added this would not just benefit the individuals concerned but also improve the nation's economic and fiscal outlook.
The research findings presented in the report found huge inequalities in the capacity to work by local area. For example, in a third of UK districts, healthy life expectancy falls short of 70.
It highlighted that this exposes the limits to a policy of raising SPA as a tool to tackle the economic and social issues of an ageing society.
The report also recommended introducing particular pension and savings measures for women. This is because on average, men earn 80% more than women - which has an effect on their respective pension prospects, according to an Office for National Statistics (ONS) Labour Force Survey cited by the report.
The CSFI's co-director Jane Fuller said: "Our report recommends that working partners should be able to contribute to the pension funds of non-working partners, with the recipient also benefiting from tax relief on these contributions.
"We also suggest that new financial products, akin to care annuities, could be developed to assist those in the ‘sandwich years' - a growing phenomenon that affects women disproportionately as caring responsibilities for children and elderly relatives overlap."
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