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Raise retirement age to 70, say Business Leaders

Date Added: Mon November 2 2009
The Institute of Directors (IoD) have launched a major new report into pensions ‘Roadmap for Retirement Reform 2009’, which sets out a radical reform agenda, and direction of travel, for both the state and private retirement benefit systems.

Looking at the retirement policy scene holistically, it argues, is essential for effective change designed to deliver better outcomes for consumers, better understanding and better engagement in long term saving.

The paper proposes 4 fundamental changes:

• In the face of greatly increased longevity, the state pension age should rise to 70 as soon as reasonably practical
• The State second pension should be abolished, together with most means tested state retirement benefits
• The savings made should be diverted to the provision of a universal Basic State Pension probably above the level we see today topped up by Pension Credit
• The current private pension saving regime does not meet 21st Century needs and should be replaced.

Commenting on the report, Graeme Leach, Chief Economist at the IoD, said: “Radical simplification is needed. Startling increases in longevity in recent decades also mean that it is unrealistic to expect to be able to fund a potential 25 to 30 year retirement from an effective 30 to 35 year working life. New approaches are needed to recognise this reality. The whole area of retirement needs to be looked at holistically, including how we fund the care needs which will come with increasing longevity. We need a state and private retirement system fit for the 21st Century. This is a policy journey which needs to begin now.”

Malcolm Small, Senior Adviser, Pensions Policy at the IoD and author of the report, said: “We were surprised at the appetite for radical reform amongst IoD members. Both state and private pension systems have now become so complex that people are becoming disengaged from pension saving and are looking for alternatives. If people don’t like the structure, they are less likely to stay in it, even if they are auto-enrolled into saving, as they will be from 2012.”