Millions of employees could be forced to stay at work far longer than they had anticipated before drawing their company pension, according to research published yesterday.
A survey of 300 companies by Norwich Union shows the number of companies with final-salary pension schemes that are planning to raise the retirement age for their scheme members is spiralling. Almost two-thirds are planning to change the age at which workers can claim their full entitlement to pension benefits. This is normally 60 or 65, but could be raised by five years to spread the cost to the employer of providing staff pensions.
Employees will either have to work until the new higher age, or accept lower pension incomes for a longer retirement.
"Employers clearly need to find an option to offset the increasing financial burden of their pension scheme," Rod Bryson, pensions strategy manager at Norwich Union, said. "They are keen to maintain their schemes, but they simply can't afford it, so they are looking to dilute benefits over the longer term."
The Norwich Union survey found that 1 per cent of final-salary schemes had raised their normal retirement age, 2 per cent were already in planning stage and 62 per cent were considering the move. Axa and the car manufacturer Honda have both announced plans to raise the age at which workers will get their full pension.
The news comes after findings from the National Association of Pension Funds last week that fewer than one in five companies now offer a final-salary pension to new employees.
Companies have been crippled by the burden of meeting the costs of final-salary schemes, which guarantee a level of benefit to members on their retirement. Three years of falling stockmarkets and the £5bn a year tax charge on pension funds have left companies struggling to honour their promises.
To mitigate the costs, companies are switching to defined-contribution schemes, where retirement income levels are determined by stockmarket performance.
Norwich Union also found that 59 per cent of employers believe the Government's recent Green Paper proposals to reform the pension system will not encourage them to increase their contributions.Reuse content