UK - The UK government will bring forward proposals to make it attractive to defer drawing the state pension, according to Alan Pickering, the chairman of the European Federation for Retirement Provision.

Pickering said the UK government is going to bring forward proposals that will make it attractive for people to defer drawing their state pension by increasing the amount of retirement benefit they will be entitled to after the current retirement age of 65.

Pickering was last year charged by the government with a simplification review of the UK pensions system.

Speaking at the ‘Future of European Pensions’ conference at the Royal Institute of International Affairs (Chatham House), yesterday, Pickering predicted that while the current means-tested approach to state pensions may see the UK through the next decade, it would not provide a suitable platform for what he called a “lasting partnership” between state and private pensions systems.

This partnership, he noted, could not be achieved without state pension modernisation to clear up a situation today of “fiendish complexity and Dickensian parsimony”.

To this end, Pickering stated that the UK government was looking at a stick-and carrot method of persuading people to retire later by increasing state pensions if they do.

“This time round the government is not countenancing radical simplification or modernisation of the state pension system. However, one of its proposals to help older workers remain in the workforce may, by historians, be viewed as one of the most significant elements in the package.

“The government is going to bring forward proposals that will make it attractive for people to defer drawing their state pension. In this way, in a non-threatening fashion, the government may have brought into the public domain the idea that working longer produces bigger state pensions.”

Offering his own prognostic on how this reform might look, Pickering suggested that by 2030 the state pension in the UK should be 70 years of age with pensions payable at the level of 25-30% of national average earnings – a significant increase on the present position.

Pickering added that the UK pensions problems could also not be solved in a “vacuum” and that that labour market reforms would be needed to encourage employees to work longer as well as companies to employ them.

The notion of early retirement, he said, had to be progressively removed from the pensions lexicon if reforms were to be effective.

“This expectation has to be quashed if the UK is to have a viable pensions system and a viable economy.”

While applauding government moves in this direction, Pickering also advised European legislators examining their own pensions systems to ‘eschew’ the UK route of allowing individuals to opt out of state pension provision toward the private sector: “Transferring a profligate promise from the private from the public purse to the private purse does not make that promise any more deliverable. If British experience is anything to go by, such a move is counter productive since the efficiencies that might otherwise flow from a deregulated approach to pension provision are more than outweighed by the regulatory costs in ensuring that those on low incomes are properly protected.”

“Social protection should be delivered through the state system. If a universal taxpayer financed state pension can provide bread and butter security for all workers in retirement, the private sector can, without too many restrictions, be relied upon to finance those extras that will convert the endurance of old age in the enjoyment of retirement.”