Jeff Salway: Harman is right to rekindle the retirement rule shake-up debate

WITH just six months to go until her 60th birthday, Harriet Harman could be accused of self-interest in her call for a change to the retirement age rules.

The debate over the default retirement age was reignited when Harman, speaking at an Age Concern and Help the Aged event on Monday, again raised the possibility that older workers could look forward to a time when they were not forced to retire at the state pension age.

Harman, the government's women and equality minister, may not be directly affected by current retirement rules – one in eight MPs would be retired if it applied to them, according to Age Concern and Help the Aged – but her proposed overhaul of the legislation to allow people to work into their seventies and eighties is belated and entirely on the money. She will be accused of nanny-state meddling, but on this matter Harman is standing on very firm ground.

The issue has been given fresh impetus by the recession, with millions of older workers who need to carry on working to keep their finances afloat being forced against their wishes to retire.

Not only are many crystallising losses by having to draw their pensions, but they lose their main source of income at a time when the returns on their life savings are meagre and the basic state pension remains inadequate.

The arguments in favour of allowing longer working lives are plentiful and persuasive. The most simple fact is that retirement laws do not reflect demographic change. Life expectancy for Scottish men living past 65 is now 80.8 years, while women passing 65 are expected to reach 84. Yet retirement limits have not changed since the days when life expectancy at birth barely exceeded 50 for both men and women (although the retirement age for women will increase from April to reach 65 by 2020).

Then there's the pensions crisis, which means too many people reach retirement with inadequate savings pots and an extended post-work life over which they have to make it last.

The government's recognition of the need to alter the rules is belated, but it may well have something to do with the estimated 31 billion of GDP lost due to working age regulations, a potential saving that's doubtless more resonant now than it was before the downturn.

That is not to say the potentially negative implications of a change in legislation can be ignored. There is a school of thought that views baby-boomers as having their cake and eating it, once again. Younger workers and future generations, already charged with paying off the massive debts bequeathed to them by the over-fifties, are entitled to some resentment. Counter to that is the pension savings and the extra tax and national insurance revenue earned through keeping people working, without which the burden of funding retired generations will be even more onerous.

More immediately there are also legitimate business concerns, which would have to be addressed in what would be a complex and difficult piece of legislation. Yet even the most hardened opponents recognise that some form of change is inevitable and necessarily, if just because of scheduled increases in state pension ages.

Any change to retirement legislation would need to emphasise choice, flexibility (with a distinction between full- and part-time work laws) and entitlement. The alternative is unwieldy legislation that makes employers vulnerable to tribunals and costly litigation.

Harman was floating ideas rather than setting out firm proposals, but her comments do indicate that the government, which is reviewing the retirement laws this year, is open to more substantial policy reform than simply raising the default age.

EXPECTATIONS of a housing market revival in 2010 – in which prices would resume their inexorable rise – have been dampened less than two weeks into the new year. Such expectations were unrealistic, and failed to account for the real reasons why prices began creeping up again in 2009, most notably an imbalance of supply and demand in a low activity market.

Lenders are among those talking the market down: Lloyds Banking Group warns that prices are likely to remain flat this year. When lenders expect little growth, the chances are we can anticipate price declines. If so, anyone who wants a sane, affordable housing market to emerge from this crisis will breathe a sigh of relief.