Suggested rise in retirement age to tackle pension crisis |
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Published
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Mon, 25 Jul 2005 14:35
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LONDON: The government has been urged to raise the retirement age to 67 by 2030 in order to solve the pensions crisis in the wake of increasing life expectancy. The Institute for Public Policy Research, an independent think-tank, says that a majority of working people do not accept that they will live longer than their parents and hence they will have to work longer to finance the increasing number of retired persons eligible for pensions.
The government starts paying basic state pension for men at 65 and for women at 60. It intends to increase the age for women too to 65 between 2010 and 2020.
The institute carried out a study covering workers aged between 25 and 55, and found that most of them expect their health to start declining from the age of 70, they are not reconciled to the idea of working longer and that when to take their pension should be left to them to decide. Surprisingly, many of the interviewees said they do not intend to rely on the pension.
The government has compiled data suggesting the life expenctancy of a 19-year-old man today is 87 years, while that of a woman is 90.
The government has commissioned a study by the head of pensions commission, Adair Turner, who is expected to submit his report soon. Adair had held forth the view that the retirement age would
"undoubtedly" have to rise.
Peter Robinson of the institute, who prepared the report on the study, said, "Our research shows that the public are not convinced and distrust the evidence from employers, the financial services industry and the government, basing their expectations on the experiences of friends and family."
Raising the state pension age would help to keep public spending on pensions constant as a share of gross domestic product, he said. He also suggests that pension should be based on the contributory principle, with entitlement linked to NI contributions.
The report recommends an increased rate of basic pension and wants the government to encourage saving by simplifying the tax regime. It says there could be a basic state pension of 105 pounds a week, which can be financed by scrapping the second pension and its associated national insurance rebates paid to higher earners who save in occupational schemes.
The pension commission is understood to be considering scrapping the earnings-related second pension and pay a liberal basic pension.
U.K.'s minister for pension reform Stephen Timms said the government has no intention to increase the state pension age. One of the government's suggestions is that those eligible for pensions should consider options of deferring the pension and receiving a lump sum or a higher income from their pension later.
A workers union, the Trades Union Congress, criticised the report saying, "Work-till-you-drop policies of putting up the state pension age will hit the poorest hardest."
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