Changes to UK state pension age welcomed but need considered thought, industry points out

News - Living

Written by Ray Clancy

Tuesday, 10 August 2010 09:45

UK Government plans to raise the state pension age for men to 66 by 2016 are too hasty and do not give people enough time to prepare, pensions experts warned today.

The National Association of Pension Funds (NAPF) said many people in their mid to late 50s who have already made retirement plans may be unable to change their savings and private pensions to cover the loss of a year’s state pension.

People in that age group who have already fully or partly retired could be particularly hit.
Instead, the pensionable age should increase to 66 by 2020 for both men and women, giving more leeway for those approaching retirement to boost their savings, the NAPF said in its response to Government consultation on the state pension age.

It said that having a unified start date for both sexes would also combat fears about gender inequality as, under the current plans, men would start retiring at 66, some four years earlier than women. A number of employers have expressed concern to the NAPF about the workplace equality implications of such a move.

The NAPF agrees that the state pension age needs to rise, but it says the Government must do more to help older people stay in work. And it says that the trade off for working longer should be a better state pension. Its proposals for a Foundation Pension would see the state pension increase to £8,000 per annum.

‘Retirement ages do need to go up, but the Government is being too hasty. Lifting the state pension age for men to 66 by 2016, or even earlier, is simply asking too much. Many people now in their mid to late 50s have made quite detailed retirement plans, and they may be unable to recalibrate their savings to cover the state pension they will lose. Six years is not enough,’ said chief executive Joanne Segars.

‘And those in their 50s who have already retired or who have switched to working part time will also have a shortfall in income for that lost year. The Government’s proposals mean that men will face the higher retirement age of 66 some four years earlier than women. The UK has one of the worst in Europe. More also needs to do be done to help older people stay in work for longer,’ she added.

The change has also been backed by the Association of Consulting Actuaries but it is calling for the state pension age to be linked to life expectancy.

‘We would welcome, however, further discussion and debate on formulaically linking SPA to life expectancy, which we expect to continue improving, rather than reactively increasing the SPA during a financial crisis,’ said ACA Chairman, Stuart Southall.

He points out that many occupational pension schemes have bridging pensions or level income options that terminate when members reach SPA. Depending on the rules of these arrangements, accelerating the increase in the SPA to 66 will either result in an unexpected increase in the arrangement's costs or result in a gap in the beneficiaries’ total pension income.