Graduates may have to work longer
University graduates may have to wait until they are 70 before collecting a state pension, the head of the Pensions Commission has suggested.
Although lower earners could still retire on a full pension at 65, to reflect their average lower life expectancy, in an interview with the Sunday Times, Adair Turner said graduates may be asked to work and wait five years longer given they live longer than lower social groups after retirement.
The former director general of employers’ group, the Confederation of British Industry, told the newspaper: “One of the sad facts is that although life expectancy is going up, it is going up least in lower socio-economic groups.
“So we have to be sensitive to that when we put up the state pension age. For example, the person who starts work at 16 would be able to get something at 65. The person who went to university and started serious work at 23 is not going to get it until 70.
“We’ve got to be wary of saying ‘Well, in order to get our numbers to add up without a further tax increase it (the state pension age) has got to be 70 in 2030, end of story’. It’s too cavalier in relation to the life expectancy of people at the bottom end of the income scale.”
With fewer and fewer people saving for their old age, analysts predict there could a 30-60 billion pounds shortfall in the pensions pot in later years.
With this in mind, Mr Turner hinted compulsion might be used to force all workers to save for a pension, with money invested on their behalf by the government.
Sir Malcolm Rifkind, Shadow Work and Pensions Secretary, said changing entitlement on the basis of a university education was “wrong” and “unworkable”.
But, speaking later to BBC Radio Four’s Westminster Hour, Mr Turner said that his comments had been misinterpreted.
He said: “The moment you think about it, you couldn’t actually run a system which had a different age according to whether you were or were not a university graduate.
“But I think the thing to understand is that we already have a system today where what you get as a basic state pension at age 65 does depend on how many years you have been in the workforce. You have to be 44 years in the workforce to get a full basic state pension. That does mean that at the moment, it is the case that somebody who was a university graduate and didn’t join the workforce until they were 23, wouldn’t get a full basic state pension.”
He added: “We have that system already, and what I was commenting on in the Sunday Times was that some people are suggesting that we move to what is called a universal system, where everybody would get a basic state pension whatever their contribution record.”
On the so-called citizens’ pension, Mr Turner said: “We recognise in the commission that there are immense potential benefits from a universal pension, which is just straight simplicity. But one of the downsides of it is that it would remove this element of fairness which does derive from the fact that at the moment, what you get is at least somewhat related to how many years you have been in the workforce.”
