The ABI has welcomed the proposal, describing it as decisive, in contrast to the Government’s delays on pension reform. Standard Life says a later retirement date will also give bigger private pensions because delaying annuitisation by a year will give income around 10 per cent higher.
But pension consultant Ros Altmann says more radical measures are needed to address pension problems, and argues that just raising pension age is not the answer.
She wants to see a list of measures such as ending contracting out for all pension schemes, which she says would save around £6billion a year straight away. She argues that changing the age allowance or tax reliefs would also bring immediate savings.
She adds that raising the state pension age to 66 will increase the disparity with public sector workers’ pensions, since they will still receive their pensions at younger ages.
Maggie Craig, director of life and savings at the ABI says: “This measure was first proposed in the Turner reforms and enjoyed political consensus, so the Conservatives are to be commended for bringing it forward. This bold move from the Conservatives is a good first step – in contrast to the Government, whose decision to delay full implementation of their own pension reform programme risks damage to the whole spectrum of UK pension provision.”
John Lawson, head of pension policy at Standard Life said, “Male life expectancy has increased by 6 years since Margaret Thatcher first came to power in 1979, yet the state pension age for men has remained at 65. Raising the bar to age 66 will make the state pension more affordable for our children, but delaying retirement by a year is also sensible for private pension savers. A 45-year-old man saving £200 a month and delaying his retirement age by just one year could see his pension rise by almost 10 per cent.”
Altmann says: “The proposal may not save much anyway if more older people just end up on means tested pension credit, which is higher than the full state pension. We already have the lowest and most complex state pension of any developed country, with a larger proportion of pensioners in poverty. Increasing part time work opportunities for older workers would be far better than forcing people to wait longer for their state pension. Let’s have a proper review of the whole system and try to get it right.”