Retirement at 70 proposed 'to ease crisis over pensions

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The Government will be accused of trying to tackle the pensions crisis by forcing people to work longer when ministers announce plans today for a "default" retirement age of 70.

The Government was today accused of trying to tackle the pensions crisis by forcing people to work longer when ministers announced plans for a "default" retirement age of 70.

A long-awaited consultation document on combating age discrimination recommended that employers should no longer be allowed to force workers to retire before they reach the age of 70.

Under the Department of Trade and Industry plans, designed to implement a European Union directive by 2006, mandatory retirement ages imposed by bosses will become unlawful and older workers will have the same protection as their younger colleagues.

However, by also proposing a "default" retirement age of 70, the Government triggered accusations that it is in effect forcing people to work for an extra five years. It may also raise suspicions that it intends to raise the state pension eligibility age to 70.

Trade and Industry Secretary Patricia Hewitt published a consultation on tacking ageism in the workplace, which she described as the last bastion of lawful unfair discrimination.

Ms Hewitt said: "We must challenge the ageist assumption that younger employees make the best workers. It is a sad fact that thousands of people in their 40s and 50s who have been made redundant never work again.

"It is vital that we widen the pool of workers so that employers can make the most of the full range of talent and skills available."

The minister said the aim was not to force people to work longer but would give more choice and flexibility to people in their 50s and 60s.

But union leaders said that the measure, to implement a European Union Directive, could put pressure on people to work longer.

Bob Crow, general secretary of the Rail Maritime and Transport Union, said the Government should be encouraging people to retire earlier.

"We are all for an end to age discrimination, but we don't want to see people forced to work until they are 70. This could undermine occupational pension arrangements, which could lead to people working until they were 70, even if they don't want to."

Derek Simpson, joint general secretary of Amicus, said: "This is a smoke screen and is only tinkering around the edges of the pensions crisis. Working longer is not the answer. There has to be compulsion on employers to protect pensions."

Critics believe the proposal will lead companies to make their staff work for five extra years by slashing the pensions of those who choose to retire earlier. Trade unions and pensions experts have called on ministers not to try to use the anti-ageism document as a means of smuggling out controversial moves on a retirement age.

Analysts say firms will take advantage of the new rules to cut their pension burden by spreading it over the additional years of an employee's working life. Firms would base their calculations on a retirement age of 70, and those retiring earlier would be penalised.

Currently, many people with traditional pensions linked to final salary receive a sixtieth of their annual salary for every year of service.

With an ageing population, Britain, along with many European countries, faces the acute problem of having fewer young workers to fund an increasing number of pensions.

Ministers are understood to want to shift the burden of pensions funding away from the state. They want retirement funding to be met by a combination of private-sector pension provision and the individual's own efforts. By allowing companies to cut pensions of those under 70, the Government will be accused of getting the private sector to "do its dirty work".

With more than half of the nation's final salary company pension schemes now closed to new members, the pensions crisis has become one of the hottest political issues and is certain to feature at the next general election. Many firms can no longer afford to meet their pensions promises because of plunging stock markets and a £5bn tax on pension funds introduced after Labour came to power in 1997.

The Government first raised suspicions that it wanted employees to work longer when it published a Green Paper on pensions in December. The proposals included an incentive to delay taking the state pension - delaying for five years could earn a 50 per cent increase in the weekly payment - and raising the normal pension age for all new public sector workers from 60 to 65.

The Government's special adviser on pensions, Adair Turner, has floated the idea of working until 70 as a simple way out of the crisis.

Ministers are certain to want to concentrate on the anti-ageism element of the proposals. The anti-discrimination proposals will still allow employers to force workers to retire at 70, but will for the first time give workers the right to take their case to an employment tribunal until that age.