Pension bill sets new retirement age
The government has today published the long-awaited pensions bill, which lays out plans to increase the retirement age to 68.
Built on the recommendations of the three-year Turner commission, the reforms aim to make the state pension more generous and more widely available, and provide new ways for people to save for retirement.
Currently women can claim the state pension at 60 and men at 65, although this will be equalised by 2020. But under the proposed legislation published today, this would be gradually increased to 66 by 2026, to 67 by 2036 and to 68 by 2046.
The bill also sets out plans to restore the link between earnings and pensions in the next parliament, to ensure state provisions increase at the same rate as wages. Wage inflation excluding bonuses is currently 3.5 per cent, although this is lower than it has been recently.
This should result in a more generous state pension. Elsewhere, the pensions bill pledges to cut the number of years it takes to build a full basic state pension from 44 years for men and 39 for women, to 30 years for everyone.
Work and pensions secretary John Hutton has previously said the success of the pension reforms would be judged on their fairness to women – just 30 per cent of women reaching retirement can currently claim the full state pension.
Under today’s plans, the government would give people in unpaid caring work, such as looking after children or sick relatives, credits towards their state pension.
By 2010, 70 per cent of women should get the full state pension, rising to more than 90 per cent by 2012.
The bill would also create a special delivery authority to advise the government on creating a new low-cost national savings scheme to help people prepare for retirement. The details of this will be set out in a white paper in the coming months.
Gordon Lishman, director general of Age Concern, welcomed the bill as “very good news for future pensioners” but warned that it did little for today’s older people.
He urged more help for those “who are already struggling on a pitifully low state pension and missing out on vital benefits cash”. The National Pensioners Convention is calling for an increase in the basic state pension from £84.25 to £114 a week.
Liberal Democrat work and pensions spokesman David Laws added his voice to these concerns, noting that the earnings link may not be restored until as late at 2015 – despite the Turner commission’s recommendation that the move be taken in 2010.
He added: “These proposals will do nothing to deal with the huge unfairness in state pensions, and will not narrow the gulf between public and private sector schemes.”
Shadow work and pensions secretary Philip Hammond also warned the bill did not address public sector pensions, saying: “The government is allowing a pensions apartheid where public sector workers retire at 60 and everyone else has to work to 68.
“It is neither fair nor sustainable to have one rule for public sector workers and another for everyone else.”
