UK- Encouraging people to retire later through higher state pensions will have minimal impact, new research shows.
Consultants Watson Wyatt found that increased incentives to delay retirement were unlikely to be very effective in either getting people to retire later or in reducing the costs of an ageing population.
The research revealed that the response to incentives was so weak that it could take an uplift in state pension benefits of about 33% for each year of delayed retirement in order to raise the average retirement age by one year.
Currently in the UK those delaying drawing their state pension are rewarded with a 7.5% increase in pension benefits and this will soon be raised to 10.4%.
The study was undertaken by Watson Wyatt economists Jonathan Gardner and Mike Orszag (pictured) using a YouGov survey of nearly 3,000 individuals.
The results indicated that that a move from a 7.5% increase in benefits per year of delay to a 10% increase leads to a rise in the average retirement date of just over one month.
In the survey, nearly 50% of men said they would not delay retirement beyond age 65 if offered the incentive of a 7.5% increase in their state pension for each year they delayed retirement. Just over a quarter said that with such an incentive they would delay retirement to at least age 70. Women were shown to be more interested in delaying retirement than men. Only one in five would stick to an age 60 retirement date with 7.5% incentive, while two-thirds would delay to at least age 65.
“One approach to keeping workers in the labour force longer is simply to increase the age of earliest eligibility for pensions but this may be politically unpopular,” said the study.
It recommends that increasing the incentives to delay retirement would remedy the problems of low labour force participation.
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