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FT: IoD calls for state pension age to rise to 70

IoD calls for state pension age to rise to 70

By Nicholas Timmins, Public Policy Editor
Financial Times
Published: October 19 2009 14:16

The state pension age should rise to 70 "as soon as reasonably
practical", the Institute of Directors said on Monday.

The resultant savings should be used to simplify the basic state
pension and increase its value, in effect eliminating most means-
tested state retirement benefits.

The IoD report reflects the views of Lord Turner, chairman of the
former Pensions Commission, who has said he wishes that body had been
more radical, for example recommending a move to a state pension age
of 70 by about 2030, rather than the steady increase to age 68 by 2046
which the commission recommended and the government has adopted.

Graeme Leach, chief economist at the IoD, said "radical
simplification" of the current public and private pension systems was
needed to produce a savings regime able to cope both with greater
longevity and rising demand for long-term care in old age.

Average life expectancy after the age of 65 has risen from 12 years in
1950 to 19 years today and is projected to go on increasing.

Such "startling increases" mean that "it is unrealistic to expect to
be able to fund a potential 25- to 30-year retirement from an
effective 30- to 35-year working life," Mr Leach said.

The report does not recommend a date by when the pension age should
reach 70 and says more work is needed on detailed costings. But it
believes that an increase to 70 would pay for a state pension
sufficiently generous largely to remove the need for means-tested
benefits in old age.

The Trades Union Congress protested that with many employers fighting
to retain the right normally to retire workers at 65, the IoD's
proposals "would condemn many older people to a limbo where they are
too old to work, and too young for a state pension".

The IoD supports moving the so-called "default retirement age" that
companies can use up to 70 to match the state pension increase. It
notes that 1.3m people aged 65 are already continuing to work, full or
part-time. And 78 per cent of its own members say they expect to
continue working beyond 65.

But the report acknowledges that higher retirement ages will require
"a significant culture change" in many companies, with more training
for older workers, phased retirement and pension approaches that
support lower earnings in later years as and when an individual's
productivity declines.

Large numbers of organisations still "fall a long way short of
embracing a multi-generational workforce," the IoD said.

http://www.ft.com/cms/s/0/97ea0444-bca7-11de-a7ec-00144feab49a.html

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