Commenting on the two reports into the state pension age published today (Thursday 23rd March), Steve Webb, Director of Policy at Royal London said: "If the Government goes ahead with the more radical timetable for pension age increases (as set out in the Government Actuary review) they would be guilty of misleading Parliament. In the last Parliament MPs voted for the new arrangements on state pension age increases on the basis that people would spend two years in work for every one year in retirement.
“On this basis, no one at work today would have a pension age of 70. But on the more aggressive schedule that the government is considering, everyone in their twenties would have a pension age of 70.
“This is not what Parliament voted for and is clearly driven by the Treasury. It is one thing asking people to work longer to make pensions affordable, but it is another to hike up pension ages because the Treasury sees it as an easy way to raise money.”
Commenting on the Cridland Review call for the triple lock to be abolished, Steve Webb said: “The Triple Lock has helped to restore the state pension from a very low level in 2010. Whilst it should not continue indefinitely it would be right to review the policy at the start of each Parliament rather than abolish it now. Many people retiring in years to come will have very modest private pensions and the state pension will be of vital importance to them. We should be careful not to base policy for decades in the future on the basis of the incomes of people retiring now'.
Commenting on the reports of today’s review, Stephen Lowe, group communications director at Just, said: “State Pension Age is a natural target for people to focus on, but the later this is the more likely they are to be forced to stop work earlier, potentially leaving their financial plans in tatters.
“Offering concessions and support for those unable to work past 67 recognises this problem but perhaps not the scale of it. Today, more than half of people are not in work in the year before they reach State Pension Age. In fact, one in four men and one in three women reaching State Pension Age today has not worked for five years or more.*
“The more you push back State Pension Age, the bigger this ‘gap’ becomes for those forced to retire early and the longer they need to rely on their own resources until State Pension kicks in.
“People need to understand exactly what they are going to get and when because an extra year is a big difference. The proposal for a mid-life ‘career and pensions MOT’ is something we have pushed for because of the extra responsibility on individuals to use their pension money wisely and not take it too soon, leaving themselves short of income later on when their options are limited. There is a strong case for making these MOTs the default option to encourage high levels of take-up.”
Disappointment as Cridland sticks with ‘inflexible and outdated’ single state pension age Steven Cameron, Pensions Director at Aegon said: “We’re disappointed that the Cridland Review has rejected calls to extend the flexibilities people already enjoy with private pensions to state pensions. Requiring everyone to wait till an ever increasing age to draw a state pension is inflexible and increasingly outdated compared to today’s more flexible and personalised transition into retirement. This is a missed opportunity to meet the needs of those who through health concerns, job pressures or lack of employment opportunity simply can’t keep working into their late 60s. We call on the Government to keep the door open to future change.”
On proposals to accelerate states pension age to 68:
"Today's reports show clearly that for those who don't relish the prospect of working till 68 to get a very modest state pension, it's even more important to save more privately or through the workplace. This proposal will affect the under 40s and government needs to do much more to make sure the young are more engaged with their private pension savings from an earlier age to ensure there isn’t a ‘lost pension savings’ generation. This can then be used to make life more comfortable after state pension age but also to bridge the gap for those who simply can't or really don't want to work till their late 60s.”
Supporting State Pension statistics
On average people in the UK believe that according to the Government’s current plans they will be able to receive their state pension aged 66. However, just half (50%) of people are confident that they will be able to retire at their target age.
Upon reaching State Pension Age:
• A quarter of people (25%) of people plan to continue working part time
• A quarter (25%) plan to continue working full-time for as long as they are able to
• 12% will cease work immediately and begin claiming their state pension
• 9% believe they will have already stopped working when reaching state pension age
• 29% won't decide on the plans until they are much closer to retirement age
The younger generation are more open to working on past state pension age but this falls as people get older. A third (33%) of 25 – 34 year olds plan to work on full time past state pension age for as they are able to but once people reach pre-retirement, age 55 – 65, this falls to just a fifth (19%).
State pension as an income in retirement As people get nearer to state pension age an increasing number of people see the state pension as their main source of income:
• One in five (23%) expect the state pension will be their main source of income retirement
• For those aged 45 – 54, the state pension is expected to make up over a quarter (26%) of their retirement income and for three in ten (30%) pre retirees, those aged 55 – 65, the state pension will be their main source of income in retirement.
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