Men's pension age up to 66 from 2016

Alan Jones,Press Association
Thursday 24 June 2010 08:01

The Government was accused today of making people "work until they drop" under plans to increase the pension age.

Work and Pensions Secretary Iain Duncan Smith was providing more detail on plans to scrap the default retirement age which allows employers to get rid of staff when they reach the age of 65.

The state pension age for men is set to rise from 65 to 66 from 2016 - nearly a decade earlier than the last government was planning.

Ministers will raise the possibility of extending the pension age to 70 and even older in the following decades to "reinvigorate retirement".

Unions reacted with anger to the news, accusing the Government of showing its "class bias" just weeks after gaining power.

Paul Kenny, general secretary of the GMB, said: "The Government knows that manual workers in the industrial regions of the UK do not enjoy anything like the same life expectancy as professionals or other classes or employees.

"To force someone who has done a lifetime of toil on building sites, farms or in factories to work until they are 66 is completely unacceptable. What on earth are the Liberals doing in this coalition?" Bob Crow, general secretary of the Rail Maritime and Transport union, said: "As well as hitting pay, living standards, public services and jobs, the latest assault from the Government is work until you drop.

"If you are a rich banker with a private pension you can sail off on your yacht at 55, but for working men and women retirement will be pushed further and further over the horizon in a step back to the days of Dickens.

"That is not sharing the pain, it is hitting the poorest hardest yet again." Mr Duncan Smith will make the announcement in a speech in London later today, but in an interview with the Daily Telegraph he said: "People are living longer and healthier lives than ever, and the last thing we want is to lose their skills and experience from the workplace due to an arbitrary age limit.

"Now is absolutely the right time to live up to our responsibility to reform our outdated pension system and to take action where the previous government failed to do so." He added: "If Britain is to have a stable, affordable pension system, people need to work longer, but we will reward their hard work with a decent state pension that will enable them to enjoy quality of life in their retirement.

"That is why we are issuing a call to evidence on moving the state pension age to 66, and thereafter plan to take a frank look at the relationship between state pension age and life expectancy." The previous Labour government's policy was to raise the state pension age to 66 in 2024 and then incrementally to 68 by 2046.

Mr Duncan Smith's announcement comes as former Labour Cabinet minister John Hutton embarks on a review of public sector pensions.

As the head of the Independent Pensions Commission, he has been tasked with identifying immediate savings by September and full-scale reforms in time for next year's Budget.

The new Office of Budget Responsibility has suggested the public sector pension bill could more than double to £9 billion a year by 2015.

Deputy Prime Minister Nick Clegg said the Government is "reinvigorating what retirement means".

Mr Clegg told BBC Breakfast that the idea of having an increase of one year has been accepted, and it is just a question of when it is brought in.

"At some point we need to take this leap," he said.

Mr Clegg added that the move had to be seen in the context of other changes such as the removal of a default retirement age, greater flexibility and "triple-locked" pension rises - by which state provision will increase in line with either earnings, inflation or 2.5 per cent, whichever is highest.

"When you put all those things together, we are reinvigorating what retirement means," the Deputy Prime Minister said.

The National Pensioners Convention also criticised the Government's plans to raise the state pension retirement age, describing it as an attack on the poorest members of society.

The group said the decision ignored important information that showed that life expectancy is linked to affluence.

Ministers were accused of failing to spell out the quality of jobs that would be on offer to older workers, the loss of pensioner volunteers to society as well as the general availability of work.

General secretary Dot Gibson said: "There can be no doubt that the wealthier you are, the longer you live, so raising the retirement age is a direct attack on the very poorest in our society.

"There is a myth that we are all living healthier lives for longer and very little evidence that there are sufficient jobs around for everyone to keep working. This policy isn't about choice, it's about cutting costs and making the poorest pay the highest price.

"We must establish the right to a decent period of retirement otherwise we will soon see people working till they drop."

Brendan Barber, general secretary of the TUC, said: "While we welcome the decision to end the arbitrary retirement age, raising the state pension age over this short timescale is clearly driven by a desire to cut spending rather than a planned approach to introducing more flexible retirement.

"Raising the state pension age will hit the less well-off far more than the rich. Sixty-five-year-old men in Kensington and Chelsea can expect to live a further 23 years, while those in Glasgow only 14 years.

"A majority of 64-year-old men are already out of the labour market. Raising the state pension age will not help any of them stay in work. It will simply turn a generation of 65-year-olds from pensioners into the unemployed.

"The Government must also spell out what will happen to women, as only increasing the pension age for men is almost certainly a breach of sex discrimination law."

Mr Duncan Smith said it is crucial that pensions are "reinvigorated" through "radical reform", pointing out that pension age benefits make up two thirds of his department's annual expenditure - about £100 billion a year.

"The vast majority of people are either completely disengaged or utterly baffled by pensions," he said in a speech in London.

"Maybe it is apathy, maybe it is remoteness in time, maybe it is the complexity, or a combination all three.

"But given the impact retirement will have on us all, it is time we started to get people really thinking about what it means.

"Much of the challenge we face comes from increasing longevity. We are living longer and longer."

The minister said that when the first contributory state pension was introduced in 1926, only 34 per cent of men and 40 per cent of women were expected to reach 65, while in 1940 when the retirement age was set at 65 for men and 60 for women, life expectancy was 72.

Today it is a "staggering" 89 for men and 90 for women, so that someone retiring now could expect it to last almost 30 years.

"That means we can expect to spend almost a third of our lives in retirement. I'm sure that was never contemplated when the pension regime was first proposed.

"Britain used to have a pensions system to be proud of, but due to years of neglect and inaction we are left with fewer people saving into a pension every year and the value of the state pension has been eroded, leaving millions in poverty. We must live up to our responsibility to reinvigorate the pension landscape.

"People are living longer and healthier lives than ever, and the last thing we want is to lose their talent and enthusiasm from the workplace due to an arbitrary age limit.

"We also need to recognise that to meet the challenge of providing an affordable, stable pensions system in a society with ever increasing life expectancy, people will need to work longer.

"We will reward their longer working life by making sure that when they do retire, their pension is worth getting. We are taking radical action to restore the earnings link with the triple guarantee, ensuring our pensioners get the best possible deal.

"Everyone needs to take responsibility for achieving the income in retirement they aspire to. We will support them in doing so by giving people the chance to save into a workplace pension and the freedom to work beyond retirement age if they want to."

Pensions minister Steve Webb added: "I've worked all my life to get a fairer deal for pensioners. Up to 10 million people are not saving enough and we cannot allow this situation to continue.

"Our plans to reinvigorate pension saving will be underpinned by automatic enrolment into workplace pensions from 2012. But we need to make sure we get the details right, which is why we're announcing a thorough and speedy review, to make sure that it pays to save."

The Government called for evidence about the right point at which the state pension age should rise to 66 for both men and women.

Ruth Spellman, chief executive of the Chartered Management Institute, welcomed the Government's announcement, saying: "Forcing people to retire just because of a date stamp on their birth certificate is ridiculous. With 70 per cent of the 2016 working population already in jobs, the idea that many will have no choice but to retire strikes fear into the hearts of businesses and employees alike."

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