20 October 2009 / by Andy Davies
A new report is calling for the state pension age to be raised to 70 in an attempt to deal with people living longer.
The Institute of Directors (IoD) is launching a new report which sets a radical reform agenda for both the state and private pension schemes.
Whilst calling for the state pension age to rise to 70 “as soon as reasonably practical”, the report is also proposing three other fundamental changes to the current system.
This would involve abolishing the Second Sate Pension together with means tested benefits, in favour of diverting the savings to a universal state pension – which the IoD hopes would offer a slightly higher income than what is currently being received and it would also be topped up by Pension Credit.
IoD’s final proposal would involve replacing the current private pensions’ savings regime as it “does not meet 21st Century needs”.
Graeme Leach, chief economist at the IoD, believes “radical simplification is needed” to deliver a “state and private retirement system fit for the 21st Century”.
“Startling increases in longevity in recent decades also 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. New approaches are needed to recognise this reality,” he said.
Malcolm Small, author of the report, added: “Both state and private pension systems have now 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.”
However, the Trade Union Congress (TUC) has criticised the report saying increasing the pension age would put “older people in workless limbo”.
Brendan Barber, TUC general secretary, claims this increase would hit less well off people the hardest.
“The better off you are, the longer you live and the more years you get to claim a state pension. A big rise in the state pension age would mean the less well-off lose a much bigger proportion of their pension than longer-living affluent pensioners, who are much less dependent on the state pension in any case,” he said.
“Taking from the poor to give to the rich is no way to reform the pensions system,” he added.
© Fair Investment Company Ltd