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Blueprint for the future of pensions |
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After years of prevarication and months of political wrangling, the Government has finally laid down its blueprint for the future of pensions. The key reforms are to gradually increase the state pension age, implement a national savings scheme and return the earnings link to the state pension.
With an ageing population and higher life expectancy, the retirement age will be increased to 68 by 2044. In the last 35 years, life expectancy at birth has increased by eight years for men and six years for women. If these increases in longevity are continued over the next 35 years, a 25-year-old retiring at the age of 68 in 2049 will be able to expect more years in retirement that a 65-year-old retiring today – and at a relatively higher income.
The Government’s simple message is clear: if you want to retire earlier, save more.
The National Pensions Savings Scheme is also an ambitious project that could, if successful, help millions of people save more for their old age. But there still remain questions unanswered and it is doubtful whether the Government’s help for small firms will assist greatly as they deal with the burden of additional financial and administrative pressures. In addition there are concerns over the economic impact of this additional saving and whether it will impact on consumer spending, which has been the bedrock of UK growth in recent years.
Announced also was the re-establishing of the state pension’s link to savings, which should help hard-up pensioners and ultimately lessen the distortions created by means testing. In political terms, reintroducing the earnings link furthers the questionable concept that the role of the welfare state is to provide more than just a safety net.
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Quote source: Times Media
Article date: June 2006
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