Pension Age To Be Increased To 66 Within Five Years

Pension age to be increased to 66 within five years – Pensionfinder

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    Pension age to be increased to 66 within five years

    Due to increasing life expectancy, the pension age will be raised much sooner than expected

    The Office for National Statistics (ONS) released figures which show that the plans to slowly raise the pension age over the next 20 or more years are unsustainable in today’s financial climate. This is because the ratio of workers to pensioners will fall from today’s rate of four to one to three to one within ten years and two to one by 2040 if the rate of retirements stay the same. This equates to an increase of 5.6 million people over the age of 65 within the next twenty years.

    The previous government hoped to raise the pension age to 65 for women by 2020 and 66 for men and women by 2026. Thereafter, it was scheduled to rise in stages culminating in a retirement age of 68 for both sexes by 2046. Yet it is now a fact that children born today will live two and a half years longer on average than one born just four years ago. Boys born today will have an average life expectancy of 89 while that of girls is 90. This represents a life expectancy of twenty years more than what it was in 1940 when the pension age was set. The figures also show that one in four children born today will live to be at least 100.

    The Pensions Minister, Steve Webb, said that the nation couldn’t ignore the fact that people are living longer. The poor condition of the economy means that the government is keen to save money. The current situation with pensions means that public finances are being stretched beyond their limit. Government ministers want to educate the public about the situation and stress that it is no longer realistic to retire at 65 and enjoy decades of retirement. Ministers already launched a six week consultation which should determine the new date for the pension age to be increased. The Work and Pensions Secretary, Iain Duncan Smith, had originally planned to introduce a new retirement age of 66 for men in 2016 and 2020 for women. The change means that 6.9 million men and women will have to work one extra year before taking their retirement.

    Yet Mr Duncan Smith and Mr Webb are keen to move the date forward by another year for both sexes. A retirement age of 68 for men and women should be on the cards before 2038. Mr Duncan Smith believes that even this should be accelerated because waiting could cost the government money needlessly.

    That Britain are increasing their pension age is not a first amongst nations worldwide. Other governments have felt the severe pinch of the economic downturn and are keen to find ways to alleviate their financial woes. For example, Greece found themselves being bailed out by the EU and International Monetary Fund recently and have decided to increase the average retirement age by two years, from 61 to 63. Forcing workers to continue for another year adds 1% to a nation’s GNP and 10% to a worker’s pension fund.

    ONS figures show that the largest increase in life expectancy will occur in the North-East of Scotland and England because these areas traditionally have a lower life expectancy than the wealthier South-East. Berwick-upon-Tweed, a town on the border of England and Scotland, will enjoy an increase in life expectancy of almost 14% in the next 25 years, the highest in the UK.

    Mr Webb was optimistic when speaking about the challenges that lay ahead. He asserted that even though we will have our retirement delayed, we will have the opportunity to improve our lives and the quality of our retirement by working for slightly longer. The government is also eager to ban the ‘retirement age’ meaning that companies can no longer force employees out when they reach 65, the state pension age. Mr Webb also said that the government are keen to encourage a culture of saving and want all citizens that enjoy a comfortable retirement when the day comes. He also stressed the importance of utilising the skills of the older generation as well as providing them with the right support. For Mr Webb, it is vital that the system is improved so that pensioners will know what to expect from the state pension.

    The government has promised that those forced to delay retirement will be rewarded with better state pension packages. The pensions and earnings link is to be restored next year but trade unions are virtually certain to protest against plans to increase the pension age. The leaders of these unions see it as another stab in the back for workers who have already suffered cuts and jobs losses. ‘Gold plated’ pension rights could be eliminated as former Labour Defence Minister, John Hutton, aims to hold a review which may end lucrative final salary schemes and force workers to put more into their pension funds.