David Prosser: How to ensure Tory pension sums add up

Outlook How do the Conservative proposals to raise the age at which people may begin drawing the basic state pension to 66 square with a High Court ruling last month that employers are legally entitled to force their staff to retire at age 65?

The oddity might be easily resolved by legislation scrapping – or at least raising – the UK's default retirement age, but the wider point is worth worrying about. Expecting people to work longer does indeed save money, but it also rather depends on them having jobs.

In fact, the unemployment rate for the over-50s is around half the rate for the working population as a whole. But for older workers who lose their jobs, getting back into the workforce is difficult – TUC studies suggest that unemployed people over 50 are 10 times as likely to still be out of work after two years than back in a job. Men over 50 are 25 per cent less likely to find work again.

This may mean that raising the state retirement age does not produce the savings for which the Tories hope – if there is a corresponding rise in the cost of means-tested benefits such as the Pension Credit and Jobseekers' Allowance. Or to put it another way, a dramatic reduction in unemployment is needed alongside this pension policy.

One also wonders why, having had the nerve to float a potentially unpopular policy such as this, George Osborne did not take the opportunity to slaughter some other sacred cows. In particular, the case for higher-rate pensions tax relief continues to look indefensible in these straitened times for the public finances. Nor should the idea of ending private pension schemes' right to opt out of the state system be dismissed: such a policy would raise £6bn a year at a stroke.