Raising retirement to 70 may be necessary – consultants
UK - Workers may eventually have to consider working until the age of 70 unless they put sufficient money into their pensions, according to consultants. However new research suggests employees are not even aware of the pending change to the UK retirement age so doubts have been raised about the feasibility of increasing the state retirement age.
David Norgrove, chairman of The Pensions Regulator, made comments earlier this week suggesting a further rise in the UK state pension age may be needed up to the age of 70, to ease the financial pressures of funding retirement.
Consultants at Aon and Mercer have come out in agreement to some extent as they believe individuals will have no other option but to work until later in life unless they start seriously saving as soon as possible.
Matthew Spence, senior consultant at Aon Consulting, argued while retiring at 70 might seem a high age, the need to save could force such a decision from the UK government.
"Anything is feasible because [the government is] going to review the default retirement age next year," said Spence.
"It is not beyond the realms of possibility that it could be raised to 68 or 70. There is a pensions gap, people are not saving enough for retirement so people may say they don't want to retire because they can't afford to. If they can afford to they will make arrangements to retire. And whether or not it happens is not necessarily good for employers because one feels the employer is left picking up the cost of funding," he added.
Debra Cooper, head of the retirement resource group at Mercer, noted people are unlikely to be able to envisage or want to retire at such a late age, but argued the financial pressure some people face means there be no other option.
"Longevity is still increasing and the retirement age is going to have to go up unless they are prepared to save for their retirement," said Cooper.
"The age of 70 now seems quite old to be retiring, and I certainly would not like to have to work until that age. People should be allowed some flexibility because the evidence is higher social classes are living longer, but people in lower social classes are not living proportionally longer."
Cooper continued: "The issue is also whether there will be is there employment around for people of that age. Yes people are living longer but are they staying young for longer? Some companies would be under pressure because people may want to work if they cannot afford to retire until the age of 70."
Just days after Norgrove's comments were made, a poll conducted by Aon Consulting has revealed a significant portion of the UK population are not even aware of pending changes to the state retirement age.
A survey of 4046 people found just 24% of those questioned were aware that the minimum retirement age is rising from 50 to 55 from 2010, and just 31% of workers aged 45-54 said they were aware of the increase.
Similarly, less than half (46%) said they were aware that the state pension age for women will equalize and rise to 65 next year.
Aon acknowledged the rise in retirement age could be beneficial for employees who have another five years to save for retirement, though employers could find employee benefits become increasingly expensive both in terms of the health demands on older workers and on the pensions contributions and costs required.
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