Tory rise in state pension age - do the sums add up?

A very strange story appeared last night on the BBC news and reported here on the BBC website. Apparently George Osborne will announce today that the pension age for men is to be raised from 65 to 66 in 2016 - about a decade earlier than planned - and he 'hasn't ruled out' doing the same for women. 'Conservative sources' said this would raise around £13 billion, which is a very very large cut.

Leaving aside for a moment the fact that what they would do with women's pension ages appears to be something of an afterthought, how could you get such a huge figure?

If you were to make a wild guess at the saving from raising male state pension age to 66, you might say the following:

- each year, roughly 400,000 men have a 65th birthday;
- the full basic state pension is currently £95.25 per week; for the sake of round numbers and including a bit of additional state pension etc., let's say it's £100 per week (probably a bit of an underestimate);
- multiply the two together and you get £40m saving per week, and multiply by 52 and you get not much more than £2 billion; furthermore, as the state pension is taxable, if you don't pay out that £2 billion in pension then you lose a few million in tax, but we'll ignore that for now.

So, if the BBC are reporting the Tories as saying the saving is £13 billion, and my maths says not much more than £2 billion, what could be the difference?

One possibility is that the Tories are costing in raising women's ages to 66 in 2016 which really would be a drastic step, as women's pension age will only be around 63 at that stage on current plans.

There could be a few other bits and pieces to add in - eg savings on pension credit (if the age rules on pension credit etc. went up to 66 as well), but nothing on the scale needed to turn £2bn into £13 bn.

The only other explanation is that this is a figure for a whole Parliament - ie an annual saving times 5. Presumably in the 2016 to 2020 Parliament you could save over £10 billion from this measure, and then you are not far off the Tory figure. But the impression they seem to want to give is that this is a huge and specific cut, when, in the context of a Government deficit this year forecast to be in excess of £175 billion, £2 billion saving on pensions starts to look a lot more modest. Surely they can't be trying to mislead us??

UPDATE (07:50) - the mystery deepens! David Cameron has just been on BBC Breakfast saying that the saving is £13 billion each year and that it relates to men's pensions only because they haven't decided what to do with women! Talk about not thinking through your policy....