Tony Blair’s state pension plan is bewildering in its complexity

Can we really expect the Government to estimate the life expectancy of every individual in the country? Daily Telegraph 01/05/26 The proposals by the Tony Blair Institute for radical reform of the state pension system are well-intentioned, but – in several ways – would be a complete disaster. For starters, they would involve a shocking degree of intrusion into our private lives.

The institute proposes that citizens build up rights to a pension via a flexible new “Lifespan Fund” which includes provision to draw it early to fund periods of caring or retraining. Entitlement to a pension would be based on age, health and years of contributing. Under these plans, a person in average health would be entitled to a payout similar to today’s new state pension. This would be from the point at which their life expectancy stood at 20 years (currently around 67, but likely to rise). Someone in worse health could get that same pension earlier, and someone in better health would have to wait longer for a full pension – possibly many years. The first question is: how would the Department for Work and Pensions (DWP) work out the life expectancy of every individual in the country? According to the report, this would be done by using everyone’s digital NHS record. Leaving aside the huge issue of poor data quality, there is a big issue of privacy here. For example, apparently if you disagree with the official estimate of your life expectancy, you will be able to appeal. But this could mean trying to persuade a benefits tribunal that your health means you are likely to die sooner than DWP thinks. The second issue is how to treat low life expectancy which arises from “lifestyle choices” such as smoking. On the face of it, a lifetime smoker could get an earlier pension than someone who never smoked, which seems perverse. The authors acknowledge this and say that it might be possible to “exclude” such factors. But how can a computer work out whether your breathing problems are because you are a smoker (which wouldn’t count) or because you worked with asbestos (which presumably would)? There’s also a question about how other factors, such as deprivation, would be taken into account. When an insurance company works out how much pension to pay you in the form of an annuity, they gather information which helps them to predict your life expectancy, including things like your postcode, to help identify degrees of deprivation. If this new state system mirrors the private sector, then we could end up paying different state pensions to people on different sides of the same road, which would be totally unacceptable. But if this kind of information is not used, then the life expectancy predictions are likely to be highly inaccurate. The link between health and pension entitlement also raises challenges for people planning for their retirement. Estimates of life expectancy change all the time, and people could find that their expected retirement age move around as views about population life expectancy are endlessly revised. The report also proposes some swingeing cuts to means-tested benefits for pensioners, to avoid the risk of people with low “lifespan funds” qualifying for top-ups at retirement. It proposes scrapping pension credit and replacing it with later life support, which would only kick in at the full rate 10 years before the expected date of death. Prior to that, people in their seventies would be living on a fraction of the current pension credit rates, and this would be bound to increase pensioner poverty. Recent state pension reform (which I oversaw as pensions minister) has created a system which was designed to be far simpler, with men and women receiving broadly similar amounts and most new retirees getting at or near the standard flat rate. This is absolutely not the time to throw the whole thing in the air and replace it with an intrusive system, which would take decades to phase in and which would be bewildering in its complexity. Steve Webb is a partner at pension consultants LCP and was Pensions Minister 2010-15.