Pension reform has sparked a row as the Government is criticised for introducing a system that will force an ageing population to work into their 70s.
In Tuesday’s Emergency Budget George Osborne announced that the default retirement age would be phased out and the state pension age would rise to 66.
But despite saving the country £13 billion a year, many have criticised the Government’s plan, saying it will create an ageing workforce and increase poverty and unemployment among older generations.
The TUC’s General Secretary Brendan Barber said: “While we welcome the decision to end the arbitrary retirement age, raising the state pension age over this short timescale is clearly driven by a desire to cut spending rather than a planned approach to introducing more flexible retirement.
“A majority of 64 year old men are already out of the labour market. Raising the state pension age will not help any of them stay in work. It will simply turn a generation of 65 year olds from pensioners into the unemployed.
“The government must also spell out what will happen to women as only increasing the pension age for men is almost certainly a breach of sex discrimination law.”
News that pension payments may be linked to life expectancy has also angered critics who say that it will mean that workers in their 40's now will have to wait until they reach 70 to receive payments.
But Nick Scarrett, head of investment and pensions at Fair Investment Company, says the Government’s reforms were inevitable: "Realistically, something had to be done about the state pension system in this country because currently it is simply unaffordable.”
He says the increase in pension age will force people to take care of their own finances by saving more into a pension fund.
"Raising the pension age to 65 will go some way to help close the gap between contribution and payments, but it will be interesting to see what comes out of the review in the pension system because whatever happens, the fact remains that there has to be much more onus on the individual to look after their own finances in retirement,” he added.
Pensions secretary Iain Duncan-Smith has defended the plans saying that they will help to ‘reinvigorate’ an outdated system: “If people are going to live longer, healthier lives, then we need to have a serious debate about both affordability and retirement income. Undoubtedly, that will mean working longer. But for many people this will be a positive thing.
“People shouldn't be forced to retire when they don't want to. By contributing responsibly and working for longer, people will benefit directly from a better quality of life and a better standard of living when they choose to retire.
“I believe that the country is ready to face up to the challenges and make this happen.”
© Fair Investment Company Ltd