UK - Government critics and analysts across the pensions industry have called for an increase in the basic state pension, however not all are happy about the prospect of a later retirement.
Following reports that the Pensions Commission’s report, led by Adair Turner, on UK pension reform would propose an increase in the basic state pension in line with earnings, not just prices, The Actuarial Profession said this could be achieved by integrating the flat rate part of the state second pension with the current basic state pension.
This would also have the benefit of simplification, the association added.
Mike Fosberry, national head of pensions and financial planning at Smith & Williamson said the basic state pension should pay 50% of an individual’s income in today’s terms.
Such an increase, he said, should help avoid the poverty trap, particularly if the “seriously needy” are provided with an additional means-tested benefit of up to for example £2500 per annum.
Reaction to the proposed rise in retirement age was less warmly received, and although industry players expected the move to be met with public resistance, they described it as an inevitable development.
Kevin Wesbroom, principal consultant at Hewitt, said: With life expectancy increasing at the rate of two months every year, you need to increase the state pension age to 67 in fifteen years just to stand still.”
Ian Martin, Head of Pensions at HSBC, said according to HSBC research, 90% of people rejected the notion of a mandatory retirement age.
“We believe it is almost inevitable that the state pension age will have to be raised in future, whether or not national insurance contributions have to rise to cover the cost, he said
The Conservatives’ Malcolm Rifkind, shadow work and pensions secretary, called on prime minister Tony Blair to find a “coherent approach to dealing with a crisis that is largely of the government’s own making”.
He pointed out that Blair had only recently completed a deal with the trade unions that allowed existing public sector workers to retire at 60. On the prospect of a “Britsaver”, a national pensions savings plan based on New Zealand’s “Kiwisaver” scheme, David Laws, shadow secretary of state for work and pensions with the Liberal Democrats, said: “We are supportive of auto enrolment process - to have all employees in a scheme of some type.”
However, Donald Duval, chief actuary at Aon Consulting described the “Britsaver” as a “very bad idea”. New Zealanders had to go through the government because they had no private pensions system, said Duval.
”While people might be unhappy with the way our private pensions have performed, if we let the government choose the investment managers then they ain't seen nothing yet,” he said.
The Turner report, due for publication at the end of the month, will reportedly suggest raising the retirement age from 65 to 67; introducing a “Britsaver” scheme into which individuals will be automatically enrolled, with the right to opt out; and a more generous state pension over time.
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