The UK government has announced plans to pay a lump sum of up to £30,000 (E43,000) to people who defer their retirement for five years.
“So I announce today, we will offer people the choice – for the first time ever – of a lump sum, as much as £30,000 where they defer for five years,” says work and pensions minister Andrew Smith at the annual conference of the ruling Labour party.
“As people live longer, opportunities for older workers are critical,” Smith says. “Our pensions consultation shows that people want flexible options for retirement.”
But he rejected a rise in the state retirement age. And he said the government would change the rules so people can draw down a pension and continue working for the same employer.
“While we applaud those employers taking tough decisions to meet their pension commitments, we condemn those who walk away from their responsibilities, short-changing workers who saved all their lives. They can’t claim workers’ loyalty, then dump them in retirement.”
Smith said the government would change the law to stop employers walking away from their obligations and stop companies using take-overs to scrap pensions. And it would also legislate against firms changing schemes without consultation.
“When a firm goes bust, it can’t be right that workers see their life savings destroyed,” he says.
“We welcome this practical contribution to the cause of flexible retirement,” says Christine Farnish, chief executive of the National Association of Pension Funds. “It’s a significant step in the right direction offering real choices to people coming up to retirement. I hope the Government will consider making this proposed lump sum available tax-free as an added incentive.”
“The government continues to fiddle while Rome burns,” says Deborah Cooper, senior research actuary at Mercer Human Resource Consulting. “Though the latest move could provide good value for some, it is likely to add yet another layer of complexity to an inherently flawed system.”
Steve Folkard, head of pensions marketing at AXA, says: “The announcement at the party conference is another indicator that a state pension age of 70 is on the government’s agenda.
“AXA has long held the view that raising the State pension age would stimulate savings as people want to be able to retire at a time of their choosing rather than age 70 – this is based on research we carried out with consumers which suggested 40% would save more fore retirement if the SPA was increased to 70.”
The government said that first payments of the new pension credit would be made to more than 2m pensioners on Monday.