UK - Pensions decisions should be taken out of the hands of politicians with an independent committee delegated the task of setting an appropriate retirement age, says Stephen Yeo, partner of Watson Wyatt.
“Politicians and opposition politicians sometimes deliberately misrepresent government policy so even though the government might come out with the right long term policy, they can end up having it scuppered… and that isn’t really the right framework to get good decisions made,” Yeo told Global Pensions.
Comments made in the media by Adair Turner, who has been given the task of finding a solution to the UK pensions crisis, have sparked debate over a two-tier pension system based on educational status.
Turner was quoted in a Sunday newspaper as saying: “We have to be sensitive to [life expectancy] when we put up the state pension age. For example, the person who starts work at 16 would be able to get something at 65. The person who went to university and started serious work at 23 is not going to get it until 70.” He later insisted separate retirement ages for graduates and non-graduates would be part of the final recommendations in his report, due out in October.
Yeo believes Turner’s comments were a calculated attempt to open a debate about the right retirement age and to move people away from the idea of a single fixed age.
“I think the average age at which people stop work has got to go up in order to make pensions affordable,” he said. “There are various ways in which they can move it up – one is to improve incentives which is the present idea, another would be to have step change at a higher age which is essentially what the Lib Dems (Liberal Democrats) went into the last election saying and a third would be to have some independent committee set it in advance.”
He added: “I quite like the third because it takes control out of the hands of politicians. The interface of having to get elected every five years, with the need to take decent long-term decisions on pensions, is a painful one. If they can get a framework going which means we don’t have to endure this pain, that would be a good thing.”
Mercer Human Resource Consulting described a two-tier system with different retirement ages as “needlessly complex”.
“Specifying that graduates should work until age 70 is unfair, as this group is neither homogenous nor automatically better off,” said Tim Keogh, partner at Mercer. “A flat rate system with a single state retirement age would have the desired effect of assisting the lower paid. As the amount given would be relatively modest, it would naturally motivate the better off to seek a higher income in retirement by postponing the age at which they draw their pension.”
The British Medical Association (BMA) has warned chancellor Philip Hammond to reform the NHS pension scheme rules or doctors will reduce their working hours.
The lifetime allowance should be scrapped and replaced with a lower annual allowance, last week's Pensions Buzz respondents said.
Action for Children Pension Fund has outsourced its pensions administration to Trafalgar House.