UK - The looming pensions crisis could be forestalled by ending forced retirement on age grounds, business leaders said today.
Responding to the Pensions Commission consultation on pension reform, more than three-quarters of members of the Institute of Directors (IoD) said they opposed staff being forced to take their pension when they reached a certain age.
In addition, most employers expect the average retirement age to increase over the next two decades, with only 20% believing the current average retirement ages – 64 for men and 61 for women – would stay the same.
Miles Templeman, director general of the IoD, said: “We all know that demographic changes will radically affect our pensions position. Abolishing a compulsory retirement age could certainly help in easing the problem. From our research there seems to be a genuine belief amongst employers that many of their staff will want to work for longer than the current law allows, but most of all we need flexibility in the system.”
Meanwhile, in its own response to the Pensions Commission’s first report, Watson Wyatt warned against compulsory private pensions contributions and encouraged improving financial literacy.
Watson Wyatt partner Alan Pickering said: “The tax system is the most cost-effective way of collecting contributions and paying pensions. Compelling people to save will not turn them into savvy savers. What right has the government got to compel people to save at all, or through a particular vehicle, so long as the tax system is ensuring the abolition of absolute poverty in old age?”
Watson Wyatt also suggests the government delegate the decision to set the age at which the state pension can be drawn to an independent body.
Stephen Yeo, partner at Watson Wyatt, said: “Contracting out of the state second pension needs to be phased out to allow the provision of a higher state pension in place of means-tested benefits. This could remain affordable in the face of increasing longevity if a non-political body, such as the Pensions Commission, could be charged with increasing the minimum state pension age.”
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.