IoD calls for state pension age to rise to 70
By Nicholas Timmins, Public Policy Editor Financial Times Published: October 19 2009 14:16
The state pension age should rise to 70 "as soon as reasonably practical", the Institute of Directors said on Monday.
The resultant savings should be used to simplify the basic state pension and increase its value, in effect eliminating most means- tested state retirement benefits.
The IoD report reflects the views of Lord Turner, chairman of the former Pensions Commission, who has said he wishes that body had been more radical, for example recommending a move to a state pension age of 70 by about 2030, rather than the steady increase to age 68 by 2046 which the commission recommended and the government has adopted.
Graeme Leach, chief economist at the IoD, said "radical simplification" of the current public and private pension systems was needed to produce a savings regime able to cope both with greater longevity and rising demand for long-term care in old age.
Average life expectancy after the age of 65 has risen from 12 years in
1950 to 19 years today and is projected to go on increasing.Such "startling increases" mean that "it is unrealistic to expect to be able to fund a potential 25- to 30-year retirement from an effective 30- to 35-year working life," Mr Leach said.
The report does not recommend a date by when the pension age should reach 70 and says more work is needed on detailed costings. But it believes that an increase to 70 would pay for a state pension sufficiently generous largely to remove the need for means-tested benefits in old age.
The Trades Union Congress protested that with many employers fighting to retain the right normally to retire workers at 65, the IoD's proposals "would condemn many older people to a limbo where they are too old to work, and too young for a state pension".
The IoD supports moving the so-called "default retirement age" that companies can use up to 70 to match the state pension increase. It notes that 1.3m people aged 65 are already continuing to work, full or part-time. And 78 per cent of its own members say they expect to continue working beyond 65.
But the report acknowledges that higher retirement ages will require "a significant culture change" in many companies, with more training for older workers, phased retirement and pension approaches that support lower earnings in later years as and when an individual's productivity declines.
Large numbers of organisations still "fall a long way short of embracing a multi-generational workforce," the IoD said.