CHAPTER 11: CONCLUSIONS AND RECOMMENDATIONS |
The future impact of
immigration on population ageing
11.1. Although net immigration will tend, in the
short run, to increase the relative proportion of younger persons
within the population, it is neither appropriate nor feasible
to attempt to counter the trend towards a more aged society in
the United Kingdom through a manipulation of immigration policy
Reliability of population
11.2. The Government should, when publishing long-range
population projections, or pension or other expenditure projections
which incorporate population projections, always report the "funnel
of doubt" created by the variance between high and low assumptions
about mortality and other key demographic variables (paragraph
Ageing and aggregate
11.3. Population ageing does not pose a threat to
the continued prosperity and growth of the United Kingdom economy;
in this sense, therefore, there is no looming "crisis"
of population ageing in the United Kingdom (paragraph 3.7).
11.4. This does not mean that the future growth of
the economy is in any sense guaranteed; that depends on how we
manage our economic resources. A failure, for example, to sustain
historic rates of technological progress and productivity growth
might drastically reduce future growth rates below those projected
here. We conclude, however, that such risks exist independently
of any demographic pressures on the economy (paragraph 3.8).
Ageing, inflation, saving
and capital accumulation
11.5. Population ageing may affect savings, interest
rates and capital accumulation, but its effect is likely to be
small relative to the large range of other economic and political
factors which determine the course of these economic aggregates
Participation rates below
11.6. Official projections of future age-specific
labour force participation rates are inconsistent with the Government's
stated objectives and policy intentions of increasing the employment
rates of older people (paragraph 4.12).
11.7. The Government should pay full attention to
the need for their labour force projections and policy objectives
to be consistent and compatible with each other, bearing in mind
that each interacts with the other (paragraph 4.14).
Participation rates above
state pension age
11.8. The Government should formally review the state
pension age every five years in the light of trends in life expectancy
beyond age 65, and in the light of their own desire to increase
participation rates at older ages. Our own judgment is that the
state pension age should be raised (paragraph 4.21).
Diversity in patterns
of participation: regional effects
11.9. The Government should incorporate explicit
targets with respect to older age employment in their Regional
Economic Strategies and in the priorities they set for Regional
Development Agencies (paragraph 4.27).
Diversity in patterns
of participation: the impact of ethnicity
11.10. As part of the Government's evolving strategy
for improving the position of ethnic minorities in the labour
market, particular attention should be paid to the "double
disadvantage" of age and ethnicity encountered by members
of ethnic minorities aged over 50 (paragraph 4.32).
Explanations of early
retirement: supply and demand
11.11. The Government should commission further research
and analysis into economic inactivity among persons aged 50+,
in order to produce a clear basis of evidence on which to build
policies to promote higher rates of labour force participation
among older persons (paragraph 4.47).
Age and work capacity:
the impact of health status
11.12. The Government, employer and labour organisations
should collect information and disseminate "best practice"
guidelines on ways in which jobs and workplaces can be redesigned
to facilitate the employment of older workers who have activity-limiting
health status (paragraph 5.7).
11.13. Employers should actively evaluate and instigate
the redesign of job tasks and workplaces in order to maximise
the opportunity for retention and recruitment of older workers
Age and work capacity:
the impact of education and skills
11.14. The Government and employers should work together
to develop mechanisms to promote equal access to workplace training
and life-long learning for workers regardless of their age (paragraph
The relationship between
age and job performance
11.15. We believe it is essential to improve knowledge
of the relationship between individual age and worker productivity
in order to provide a sound foundation for evidence-based policy.
We therefore recommend that the Government commission research
on the relationship between individual age and worker productivity
in order to strengthen the evidential base for future policy initiatives
in the area of older age employment (paragraph 5.26).
The extent of age discrimination
11.16. We conclude from the evidence available that
there exists a significant degree of age discrimination in employment,
and that this discrimination occurs throughout the economy and
in both public and private sectors. (paragraph 6.14)
11.17. Few employers operate overtly ageist recruitment
and retention policies (except in so far as they use fixed retirement
ages). Age discrimination is frequently the unconscious outcome
of an employer's more general human resource management policy
and procedure (paragraph 6.15).
11.18. Ageism in public appointments, whether directed
against those considered too old or too young, should be brought
to an end, and an explicit commitment to age diversity in public
appointments should be made by the Government and by all sponsoring
Departments. We believe that this can best be achieved by ensuring
that the process of appointment to any public body complies with
the terms of the forthcoming legislation on age discrimination
in employment, even in those cases in which such appointments
do not constitute formal employment (paragraph 6.24).
11.19. The Commissioner for Public Appointments should
be given statutory authority to seek out cases of ageism in public
appointment procedures, and should also have powers which would
lead to the diminution and eventual eradication of ageism (paragraph
11.20. In relation to ageism, the remit of the Commissioner
for Public Appointments should be extended to include appointments
to those publicly funded bodies which currently or prospectively
lie outside this remit (paragraph 6.27).
The legislative environment
11.21. The Government should be as explicit as possible
in providing illustrations of the circumstances in which exceptional
treatment may be justified, in order to provide the clearest possible
guidance to both employers and workers (paragraph 6.34).
11.22. In order to minimise the cost to all parties
of disputes relating to age discrimination, we recommend that
the Government should incorporate in the forthcoming legislation
on age discrimination the option of rapid and low-cost arbitration
of disputes (paragraph 6.41).
11.23. The Government should not permit the continued
use of a normal retirement age by employers, whether at age 65
or 70 or 75, unless the employer can provide a reasoned and objective
justification for the use of age rather than performance criteria
in the determination of employability. The Government should set
an example of good practice by explicitly removing upper age limits
in all public-sector employment in advance of the implementation
of the forthcoming legislation on age discrimination (paragraph
11.24. A move from age-based to competency-based
criteria for recruitment, promotion and retirement will require
a profound cultural shift on the part of both workers and employers.
Long-established conventions about seniority-based promotion and
pay will have to be challenged, employers will have to operate
transparent and justifiable personnel policies, and employees
will have to accept regular performance monitoring and assessment
11.25. As soon as the draft legislation on age discrimination
is in place, the Government, in conjunction with both employer
and worker organisations, should embark on a major campaign to
raise awareness of the impending legislation, and of its likely
effects (paragraph 6.48).
11.26. Just as legislation is now scrutinised for
possible infringements of, for example, human rights, it should
become routine for such scrutiny to cover the issue of age diversity,
and for Ministers to certify that policy and legislation do not
contain an ageist element (paragraph 6.49).
11.27. The restriction of student loans to people
below the age of 54 is blatant discrimination (paragraph 7.10).
11.28. The Department for Education and Skills should
explain why age discrimination exists in the provision of student
loans (paragraph 7.11).
11.29. The contribution basis of the basic state
pension acts as a significant barrier to the acquisition by women
of full state pension entitlements (paragraph 8.7).
11.30. The basic state pension should be paid on
the basis of citizenship rather than contribution record (paragraph
Opportunities for private
provision for retirement
11.31. In order to strengthen consumer confidence
in equity release products, we recommend that all such products
be brought within the FSA's regulatory jurisdiction as soon as
is practicable (paragraph 9.4)
11.32. The Government should consider phasing out
over time the tax-free lump sum (paragraph 9.9).
11.33. The Government should set an example by explicitly
including information on the value of employer pension contributions
in pay slips and in recruitment material for all public-sector
jobs. We further recommend that a timetable be established for
extending this practice to private-sector employment (paragraph
11.34. The Government's policy goal of encouraging
the delivery of more financial advice to individuals via the workplace
is to a significant degree frustrated by the Government's policy
goal of ensuring that financial advice is provided according to
FSA rules (paragraph 9.19).
11.35. The Government, in co-operation with the FSA,
should take action to resolve this conflict of policy goals in
order to facilitate the provision of financial advice by employers
and make clear the basis on which employers may provide advice,
without lowering standards (paragraph 9.20).
11.36. We believe that there is a role for Government
in providing a simple, secure and guaranteed long-term savings
instrument which can be used by lower- income individuals who
do not wish to expose themselves to the costs and risks involved
in purchasing a commercial pension product. The Government should
provide such a product, in the form of a pensions bond with a
real rate of return linked to the economy-wide growth rate and
administered by National Savings (paragraph 9.25).
11.37. A general extension of compulsion in pension
savings should be avoided. However, that requires the Government
to take action to provide a higher minimum state pension (paragraph
Uncertainty and private
11.38. The Government should explore with the voluntary
sector and the financial services industry the possibility of
developing a national financial advice network for low-income
individuals (paragraph 9.38).
11.39. The proposed reform to the regulatory and
tax environment of occupational pensions will come too late to
reverse, or even stem, the tide of closure of defined benefit
pension schemes (paragraph 9.42).
11.40. The closure of defined benefit pension schemes
seems to be associated with a reduction in overall pension savings,
which will have the effect of reducing the value of future pension
entitlements (paragraph 9.44).
Complexity and uncertainty
11.41. The state pension system is too complex to
function effectively, and the Government have taken insufficient
notice of widespread concern about this complexity in their formulation
of pensions policy (paragraph 10.6).
11.42. The Government should produce a clear set
of pension performance objectives which include indicators of
the outputs of the pension system (present and expected future
pensioner income) as well as the inputs to the system (the scale
and source of pension finance). The Government's success in meeting
these objectives should be regularly monitored and published (paragraph
11.43. The Government should provide an explanation
of the rationale for the continuation of age-related benefits
such as subsidised travel (paragraph 10.15).
Means testing and public
11.44. The Government's heavy and growing reliance
on means testing the pensioner population is regrettable because
- unduly penalises current pensioners who have
struggled hard to provide a small private income for themselves
- sends a clear signal to many current workers
that it is not in their interests to save for their own old age
- is unfair to tax some of the poorest members
of our society at marginal rates as high as or higher than those
imposed on the rich (paragraph 10.25)
11.45. As a top priority, the Government should consider
introducing a non-means-tested state pension paid on the basis
of citizenship to all persons of pension age. We believe that
the provision of this baseline state pension is a necessary element
for the development of a more extensive system of voluntary pension
saving in the United Kingdom (paragraph 10.28).
11.46. The Government should expeditiously develop
a fully costed proposal for the payment of the basic state pension
at the level of the minimum income guarantee for all pensioners
aged 80 and above (paragraph 10.31).
The concept of a "pensions
11.47. In order to increase the level of consensus
associated with long-run pension planning, the Government should
establish an independent authority to monitor, undertake research
and make recommendations on pensions policy (paragraph 10.42).