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Public consultation launched into changes to UK state pension

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  • Public consultation launched into changes to UK state pension

UK - A public consultation into "radical" changes to Britain's retirement system was today launched by the Department for Work & Pensions.

The government hopes to phase out the default retirement age and increase the state retirement age to 66 faster than the current deadline of 2036, but no earlier than 2016.

The consultation is led by former Institute of Fiscal Studies deputy director Paul Johnson.

Other areas being examined include how to ease the transition to the National Employment Savings Trust (NEST), with auto-enrolment set to begin in 2012.

Pensions minister Steve Webb argued pensions saving needed to be encouraged and said one of the ways of achieving this was through auto-enrolment.

"But we need to make sure we get the details right, which is why we're announcing a thorough and speedy review to make sure it pays to save," he said.

Iain Duncan Smith, secretary of state for Work & Pensions, added workers needed to take responsibility and save to achieve their desired income upon retirement.

"We will support them in doing so by giving people the chance to save into a workplace pension and the freedom to work beyond retirement age if they want to," he said.

Duncan Smith added arbitrary age limits enforced by the retirement age meant losing the talent and enthusiasm of those living longer.

Current plans to tackle low state pension levels will also see the earnings link reintroduced next year, meaning that it will increase either by the rate of earnings, inflation or 2.5% - whichever is highest.

Some within the industry believe increasing the retirement age will in fact encourage more people to save.

Ian Naismith, head of Pensions Market Development at Scottish Widows, said: "We live in an ageing society and will all have to work longer, a need that has only been increased by the economic climate of recent years."

However, not everyone welcomed the move to increase the state retirement age ahead of schedule.

TUC General Secretary Brendan Barber cautioned that many people already close to the age of retirement are no longer part of the labour market.

"It will simply turn a generation of 65-year-olds from pensioners into the unemployed," he warned.

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