18 November 2004

The Rt Hon Alan Johnson MP
Secretary of State for Work and Pensions

AARP Gala Dinner

Thursday, 18 November 2004

(CHECK AGAINST DELIVERY)

I’m delighted to have been invited to join you this evening at this major and very well-timed international conference.

It’s well-timed because the nature of the challenge posed by ageing populations has perhaps never been higher in the public consciousness – and it’s never been clearer that we need to act today to build the solutions for tomorrow.

The demographic challenges are clear. Today, in the UK, centenarians are the fastest growing demographic group; while the number of people over pensionable age will overtake the number of children in the next three years. And by 2021 40% of the UK population will be over 50 while those over 80 will double by 2031 to 5 million.

Tomorrow’s pensioners will be very different from today’s. The next generation of pensioners will have lived through technological revolutions rather than World Wars. They will have had to cope with the smart card rather than the ration book. They’ll be independent, healthier and have very different political demands.

The challenges created by this ageing population are much wider than saving for retirement. They include employment, healthcare, discrimination and access to services. They require Governments to think much more widely about how to meet the needs of older people: from sports centres – to care homes; From transport – to the workplace.

At the core of this is the need to change fundamentally the way we think about ageing. It’s increasingly not about dependency – more often older people themselves are depended on as carers and grandparents.

It is about breaking the link between age and dependency by encouraging and supporting older people to play an ever greater role in our society.

Ultimately “Re-inventing Retirement” is about how our culture; our whole society changes and whether we can build the right infrastructure to make ageing an opportunity rather than a threat.

I was encouraged to hear that in this morning’s unofficial focus group session with Stephan Shakespeare you voted by nearly 4:1 that ageing populations are not a problem but an opportunity.

What was less encouraging was that in the AARP-sponsored international survey ahead of this conference there was a strong view coming through that countries could somehow “muddle through”.

But making demographic change an opportunity means planning now for an ageing population. Muddling through is simply not an option.

There’s no single magic solution. Each country has to find the right mix of policies that will work for them. But we must explore the options together, learn from each other’s experience and expertise – as we are doing at this conference – and actively plan for an ageing community.

Here in the UK, one important part of this is our package of measures to ensure sustainability of state pension provision by targeting resources at the poorest pensioners.

Measures such as Winter Fuel Payments, increases in the Basic State Pension and a Pension Credit that rewards pensioners for having built up some savings, mean that the poorest pensioners are now some £1800 a year better off than under the 1997 system.

But we need to go further and wider in our approach.

So we are now preparing a Government Strategy for an Ageing Society. This will set out our vision of active ageing in the 21st Century and how we are planning to build the infrastructure – physical and social – and create the major social and cultural change to achieve it.

The Prime Minister has this morning announced the establishment of a new Cabinet Committee to drive forward this work across Government.

I want to share some of my early thoughts on this with you today. While many of the details will be UK-specific, the higher-level issues will need to be addressed by all our international partners.

Planning for an ageing community will mean addressing 5 key challenges:

I’d like to say just a few words about each.

Empowering older people in the workplace

A crucial part of the response to longer lives must be enabling people to choose to work for longer. Older people are a valuable part of the labour force and yet many retire early because they are compelled to stop work rather than because they want to.

Avoiding the cliff edge between work and retirement and breaking down the barriers that prevent employers from benefiting from the skills and talents of older workers must be a Government priority.

Some have suggested that we should raise the State Pension Age but part of the challenge that we face in the UK, is to help people to work up to the current State Pension Age rather than setting a new one. For example, statistics show that over 1/3 of men are outside the labour market by the age of 60; 2/3 before age 65.

Our State Pension Deferral policy increases the rewards for choosing to work for longer – introducing an enhanced pension or a lump sum of up to £30,000 for people who decide to take their State Pension at 70 rather than 65.

And our tax simplification measures also mean that, for the first time, it’s possible to carry on working for the same employer whilst drawing an occupational pension.

Tackling discrimination

Of course, one particular barrier that can stop older people working for longer is discrimination. We’re currently considering how to legislate to outlaw age discrimination and we’re studying closely the difficult question of mandatory retirement ages.

Can it be right that people can be sacked for being 65? Intuitively no. But it’s a complex issue which impacts upon employers. Currently retirement ages can be a management tool for companies – so we need to tread carefully.

Age-related discrimination is not the only problem. Older women face serious problems with pensions and employment which add a gender dimension to this.

And evidence suggests that there is also a strong age-related aspect to disability. While disabled people make up 8% of 20-29 year olds, they represent 24% of 50-59 year olds.

Disabled people face barriers to participating in many aspects of life. Some of these barriers are physical and some are attitudinal.

Breaking down these barriers and enabling individuals to realise their own ambitions of securing a job and staying in work must be central – not just to empowering older and disabled workers – but also to the wider cultural change that we need as individual countries and as an international community.

In the UK, civil rights for disabled people is the last great emancipation issue of our time – and recent legislation means that in years to come, the mis-treatment of disabled people typical of the last century – and still too often the case today – will be seen as an affront to their humanity.

Enabling people to save for retirement

We simply can’t afford to allow discrimination to exclude the skills of an entire group from the pool of labour that we have available to meet the growing pensions challenges of an ageing population.

This conference is also well-timed for me because tonight our Pensions Bill will receive Royal Assent and become law. This is a landmark in securing and strengthening the UK’s tradition of private pension provision.

The Act creates the Pension Protection Fund which will radically transform the nature of protection for members of defined benefit pension schemes.

But it will also help employers to provide pensions in the first place. The Act strips away layers of regulation that have built up over the years and it complements the radical tax simplification which replaces today’s 8 separate tax regimes with one single regime.

All this will bolster confidence in pension provision. But another key dimension is giving individuals the information they need to enable them to save for their retirement.

One crucial step is activating workers to ensure that they take advantage of pension provision that is already available.

One of the findings from the recent report by the Pensions Commission –- established by Government to look into this whole area – was that for the earnings bracket with the most people in it – namely those on £10,000–£20,000 – there are more people with no pension working for employers that have a contributory scheme than there are workers who have no pension and no access to a scheme.

Clearly if we could put that right, we would go a long way towards addressing the current problem of under-saving for retirement. So I’m very interested in options such as auto-enrolement – so that people have to opt out rather than opt in. I know this has been very successful in America – with evidence suggesting that it can double participation rates – and I’m very keen to explore this further in the UK.

Promoting healthier lifestyles in old age

At the heart of our strategy needs to be the conviction that the later decades of life should be as fulfilling as the earlier ones. That retirement should be invigorating and fulfilling rather than a period of decline and isolation.

This means prolonging good health by keeping mentally and physically fit in retirement.

This week’s Government Health White Paper takes an important step in helping people to choose a healthier lifestyle. It included a new health advice service available over the phone, internet and digital TV – with everyone being entitled to an NHS health trainer.

But it’s about more than just health and about helping people secure the care they need. We must think about meeting the growing demand of older people for leisure services and transport. And we need to tackle the fear of isolation by encouraging and supporting older people to contribute to the wider local community.

Only a quarter of over-60s feel that they can influence local decisions. And, of course, the proportion of older people who live alone is likely to increase in the next 20 years.

So encouraging older people to build alternative networks of support and interest – perhaps through social clubs and activities – and tackling this sense of exclusion is crucial if we want to bring about real cultural and social change.

Partnership across Government and at local/community levels

Delivering this change means working in partnership across and outside Government with the private sector and at local and community levels.

Our aim is that the engagement of older people will now be a key part of the Comprehensive Performance Assessment for local authorities. Nationally, Government departments must join up to deliver an ever greater collective package, closely examining, for example, how science and technology or sport and culture are meeting older people’s needs.

Conclusion

By acting now we can plan for an ageing population. Governments must show leadership – and they must have the courage to convey difficult messages and act to ensure that they shape the cultural and social change that will empower older people and allow society to benefit from what is ultimately one of the greatest advances of our time – namely that all of us can look forward to longer lives.

With the right planning, we can all look to an actively ageing future with confidence and serenity.

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