By Jaimie Kaffash
24 June 2010
Work and Pensions Secretary Iain Duncan Smith today announced more details on the government’s pension plans, including the increase in the state pension age to 66.
The government will be launching a ‘call for evidence’ from the public and interested parties on raising the age at which everyone will be entitled to state pension. Duncan Smith also confirmed that the link between state pensions and earnings would be restored from 2011, with a minimum increase of 2.5% a year. There will also be a consultation on the phasing out of the default retirement age.
The pensions secretary said: ‘Britain used to have a pensions system to be proud of, but due to years of neglect and inaction we are left with fewer people saving into a pension every year and the value of the state pension has been eroded, leaving millions in poverty. We must live up to our responsibility to reinvigorate the pension landscape.
‘People are living longer and healthier lives than ever, and the last thing we want is to lose their talent and enthusiasm from the workplace due to an arbitrary age limit.’
But charities warned that there must be a fairer jobs market for older people before the reforms are implemented.
Michelle Mitchell, Age UK’s charity director, said: ‘Failure to do so will force millions of older people, many of them poorer and with lower life expectancies, to work for longer or face another year trapped in unemployed limbo. Any review into bringing forward the state pension age increase must take into account the full impact.’
David Blake, director of the Pensions Institute at Cass Business School, City University, told Public Finance that this move was necessary. ‘This is the easiest way. If you work one year longer, you are adding to your pension fund by one year and drawing it out one year less – you get two years for the price of one. It is easier than putting contributions up.’
However, he added the ‘effective retirement age’ – the age most people retire – had to increase. He said most males who draw state pensions at the age of 65 are out of work, so more needed to be done to use manual workers' skills in other areas, such as helping in DIY shops.
24 June 2010
Work and Pensions Secretary Iain Duncan Smith today announced more details on the government’s pension plans, including the increase in the state pension age to 66.
The government will be launching a ‘call for evidence’ from the public and interested parties on raising the age at which everyone will be entitled to state pension. Duncan Smith also confirmed that the link between state pensions and earnings would be restored from 2011, with a minimum increase of 2.5% a year. There will also be a consultation on the phasing out of the default retirement age.
The pensions secretary said: ‘Britain used to have a pensions system to be proud of, but due to years of neglect and inaction we are left with fewer people saving into a pension every year and the value of the state pension has been eroded, leaving millions in poverty. We must live up to our responsibility to reinvigorate the pension landscape.
‘People are living longer and healthier lives than ever, and the last thing we want is to lose their talent and enthusiasm from the workplace due to an arbitrary age limit.’
But charities warned that there must be a fairer jobs market for older people before the reforms are implemented.
Michelle Mitchell, Age UK’s charity director, said: ‘Failure to do so will force millions of older people, many of them poorer and with lower life expectancies, to work for longer or face another year trapped in unemployed limbo. Any review into bringing forward the state pension age increase must take into account the full impact.’
David Blake, director of the Pensions Institute at Cass Business School, City University, told Public Finance that this move was necessary. ‘This is the easiest way. If you work one year longer, you are adding to your pension fund by one year and drawing it out one year less – you get two years for the price of one. It is easier than putting contributions up.’
However, he added the ‘effective retirement age’ – the age most people retire – had to increase. He said most males who draw state pensions at the age of 65 are out of work, so more needed to be done to use manual workers' skills in other areas, such as helping in DIY shops.
