State pension age is still a cause for concern

State pension age is still a cause for concern

09 August 2010 / by Lois Avery

Pension savers need more time to cope with the Government’s plans to raise the state pension age, according to experts.

The National Association of Pension Funds (NAPF) said many people in their mid to late 50s who have already made retirement plans may be unable to change their savings and private pensions to cover the loss of a year's state pension.

As part of June’s Emergency Budget measures the new coalition agreed to raise the pension age from 65 to 66 by 2016 for men and in a bid to save billions being paid out to an aging population.

But many argue that savers will need more time to adjust to the changes, which could leave them with a shortfall in their retirement planning.

Joanne Segars, chief executive of the association, said: "Retirement ages do need to go up, but the Government is being too hasty.

"Many people now in their mid to late-50s have made quite detailed retirement plans, and they will be unable to recalibrate their savings to cover the state pension they will lose. And those in their fifties who have already retired will have a shortfall in income for that lost year.

"The trade-off for working longer should be a better state pension - the UK has one of the worst in Europe, and we think it can rise to £8,000 a year. More also needs to do be done to help older people stay in work for longer."

The Labour Government wanted female workers to begin retiring at 65 by 2020, rising to 66 for both sexes in 2026 but the dates were brought forward by David Cameron as part of the most radical overhaul of the pension system for 20 years.

But Dr Ros Altman, an independent pension policy advisor, says more changes are still needed:  “Instead of tiny increases each year, that will still leave a wholly inadequate state pension (about the lowest in the developed world), I believe we should pay a much higher level of flat rate basic pension - perhaps from a much older age - such as 70 or 75 - but keep existing limits for those below this age.

“At the same time, we must facilitate part-time work and outlaw age discrimination, so more can stay in the labour force. If we fail to do so, the result will be much lower growth, much higher pensioner poverty and potential political and social unrest.

© Fair Investment Company Ltd