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Pension system to see radical reforms

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The government is planning to accelerate moves to raise the state pension age for men to 66 as part of a major overhaul of the pensions system.

Under the reforms, the default retirement age is to be dropped, making it illegal for employers to oblige employees to leave their jobs as soon as they reach 65.

Other measures will see some 10 million employees who are not currently contributing to a retirement fund automatically enrolled into a company scheme.

The government’s pensions team intend to introduce legislation soon for raising the state pension age for men to 66, although the increase would not happen before 2016.

The retirement age for women will climb to the same point a few years later.

The Labour administration had set out a policy of increasing the state retirement age for women to 65 by 2020, rising for both men and women to 66 between 2024 and 2026, to 67 between 2034 and 2036, and to 68 between 2044 and 2046.

However, the new government is to speed up the process, perhaps even setting a retirement age of 70 as a target.

A review will be carried out to find out whether the last government’s auto-enrolment scheme is workable and to make sure that firms are ready to enrol millions of staff between 2012 and 2017.

Iain Duncan Smith, the Work and Pensions Secretary, 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“Now is absolutely the right time to live up to our responsibility to reform our outdated pension system and to take action where the previous government failed to do so. 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 for 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.”