State Pension  

Later state pension age 'must come with job opportunities'

Later state pension age 'must come with job opportunities'

Higher state pension ages must be accompanied by greater employment opportunities for older workers to avoid hardship in retirement, according to an intergovernmental organisation.

According to the Working better with age report, published today (August 30) by the OECD, many countries have increased the statutory retirement age in their public pension systems, and several have also taken steps to align this age for men and women.

In the UK the state pension age is currently 65 for men and women, after it was aligned in November 2018.

From December 2018, the state pension age will rise for both men and women until it reaches 66 in October 2020 and 67 between 2026 and 2028.

Last week (August 23), the government was told to increase the state pension age to 75 by 2035 to tackle the challenges posed by an ageing society.

The proposal – which also includes raising the state pension age to 70 by 2028 – was made by the Centre for Social Justice, a think tank chaired by Iain Duncan Smith, the former secretary of state for work and pensions.

According to the OECD’s report, statutory pension ages range from 58 for women in Turkey to 67 in Iceland, Israel and Norway. 

But the club of mostly rich nations warned that countries must create job opportunities to facilitate this rise in state pension age otherwise people will face hardship in later life.

One proposal put forward to avoid this was to allow workers to have a phased retirement where they can access their pension pots while continuing to work.

The report stated: "Flexible retirement provides older workers with the option to continue working, often part-time, while drawing at least a partial pension, or to choose when to retire with pension rights adjusted in an actuarially neutral way. 

"Combining work and pensions is possible in most OECD countries but the conditions for doing so vary. 

"All countries allow pensioners who have fully retired to engage in paid work but earnings from this employment can affect pension payments in different ways. These depend on the design of a pension system and its individual components, as well as tax rules and rules governing possible withdrawal of pensions once earnings from work reach a certain level."

The report also found that access to early retirement has become more restrictive to discourage individuals from leaving employment at an early age while they are still in good health.

In some countries, this restriction is imposed by an increase in the minimum years of contributions that are required to receive a full pension - such as in Austria, Italy and Spain - or through large penalties - such as in Portugal.

The Netherlands and Poland have gone as far as abolishing early retirement options for the private sector entirely, while Belgium has made early retirement more costly for employers. 

The OECD called on governments to reward work at an older age by ensuring pension systems encourage and reward later retirement and by providing more flexibility in work-retirement transitions.