Personal Pension  

Pensions minister seeks ‘fair society’ of savers

UK workers can expect to work six months longer before they retire, the department for work and pensions has announced.

In its 65-page business plan, the DWP has suggested that increasing the retirement age by six months each year could help reduce state dependency.

In the plan, the DWP showed that in 2014-2015, men were already retiring at approximately 64.7, and women at 63.1. This is higher than 2012, when the average age was 64.5 for men and 62.7 for women.

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Therefore, making a six-month extension to the state retirement age was reasonable, the DWP report said, adding: “Extending working life is an important part of a response to demographic ageing and ensuring pensions sustainability.”

Earlier this week, at the Liberal Democrat party conference, the pensions minister told delegates that, for too long, UK pensions had been “bafflingly complex” and produced poor outcomes.

Mr Webb reminded delegates that the new system would be “simple”. Someone starting work will have to contribute for 35 years to get a full pension of approximately £144 a week, with the rate set so that people are clear of the basic level of means-tested benefits.

He also cited auto-enrolment as tackling a “growing unfairness” in workplace pensions.

Mr Webb added: “Last year, in the private sector, only one worker out of three had any pension from their job at all. I was determined we should press ahead with a revolution in workplace pensions to match our reforms of state pensions.”

Huw Evans, deputy director general of the Association of British Insurers, said: “For a long-term sustainable pensions system that provides people with an income fit for their retirement needs it is essential that people are encouraged to save more for longer.”

However, Ros Altmann, the government’s older workers’ champion, said: “Suggesting an increase in average retirement ages by six months a year can only be a short-term aim.

“As people are living longer, it is inevitable that they will need to work longer, to achieve higher lifetime incomes. However, a rise of six months a year would mean, over the next 30 years, people would be retiring at age 80. I’m not sure that’s a realistic policy aim.”

Adviser reactions

David Brooks, technical director at London-based Broadstone Corporate Benefits, said: “Mr Webb has aimed the latest kicks on the field of pensions that has become a political football for all the main parties.”

Nigel Green, chief executive of international firm the deVere Group, said: “Understandably, the government needs to do something radical, but these proposals will only produce the desired outcome for the government if people can remain in, and continue to be effective in, their jobs.”