UK - Local authorities could save up to £850m annually under proposals to increase the normal retirement age in local government pension schemes to 65.
The DWP outlined its plans to increase the retirement age – from 60 – last week as part of wide-ranging plans for pensions reform.
The decision has angered unions. But the government, following the Institute of Directors’ recommendation, said it cannot expect the private sector to raise the retirement age to solve the pensions crisis unless it first does the same.
Hymans Robertson partner and head of local authority practice Douglas Anderson calculated that the change in retirement age would save local authorities anywhere between 1-2% of annual payroll – which amounts to between £600m and £850m per year, in total.
Anderson said: “The move should make the benefit structure sustainable. It could help to mitigate increases in employer contributions arising from the 2004 valuation... if it is implemented promptly for the future service of existing staff.
“The challenge for employers is to motivate staff who want to work for longer. The devil could be in the detail of the new regulations.”
Public sector union Unison pensions officer Glyn Jenkins said he is not against extending working lives. But he warned that by scaling back on early retirement benefits, many workers will be left with less income in retirement.
He explained: “What we do have a problem with, is the pension scheme being made worse in an attempt to bring that about.
“We believe that simply making early retirement benefits worse will not extend the working life, it will just throw many more people into poverty for longer.”
London Pension Fund Authority chief executive Peter Scales added that the move will not be taken well by scheme members.
“Members are bound to object because [the government] has changed the benefits in the scheme from their expectations.
“But if it means that the overall sustainability of the scheme into the future is retained, then they ought to support it.”
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