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Put retirement age up to 70, argue employers. Pearson May News Update - Tuesday 20 October
Put retirement age up to 70, argue employers
A leading employers’ group, the Institute of Directors (IoD), has called for a radical overhaul and simplification of the pensions system.
Launching a major new report, the IoD argued for a new “direction of travel” for both private and state pensions.
Under the IoD plans, the state retirement age would go up to 70, while means-tested retirement benefits would simply go.
Specifically, the report recommends that, with longevity on the increase, the state pension age should rise to 70 as soon as reasonably practical.
The state second pension should be abolished, along with most means-tested state retirement benefits. The savings made as a result should be used to provide a universal basic state pension at about its current level but topped up by pension credits.
The IoD also claimed that the present private pension saving regime does not meet the needs of the 21st century and should be replaced.
Graeme Leach, the IoD’s chief economist, said that radical simplification is required.
Mr Leach argued: “Startling increases in longevity in recent decades mean that it is unrealistic to expect to be able to fund a potential 25 to 30 year retirement from an effective 30 to 35 year working life.”
What is needed is a holistic review of the whole area of retirement, he continued, including how the care needs which will come with increasing longevity are funded.
Malcolm Small, the senior adviser on pensions policy at the IoD and author of the report, warned that the complexities of retirement saving are now such that they may actually deter people from pensions saving.
Mr Small said: “Both state and private pension systems have become so complex that people are becoming disengaged from pension saving and are looking for alternatives.
“If people don’t like the structure, they are less likely to stay in it, even if they are auto-enrolled into saving, as they will be from 2012.”
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