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Budget 2011: State pension age could get longevity link

A radical reform of the state pension system is planned which could see the pension age linked to longevity and a £140 a week flat-rate benefit.

In his Budget speech on Wednesday, Chancellor George Osborne said the Government will seek “a more automatic mechanism” for increasing state pension ages in the future by linking the figure to life expectancy.

The Budget document says policymakers are considering a “regular independent review” of longevity changes to ensure that costs are spread fairly between generations.

The Government has already announced an acceleration in the state pension age for men and women to 66 by April 2020.

Standard Life head of pensions policy John Lawson says: “This will hit young people the hardest. A 25-year-old might not receive their state pension until they are 75 under this system. It will mean many face a reality check because people do not realise how long they will have to wait until they retire.”

Osborne also confirmed that the Department for Work and Pensions will shortly publish a green paper outlining plans to introduce a flat-rate, universal state pension of around £140 a week for future retirees.

The Budget document says this is one of a number of reform options being considered.

The Treasury says it will honour con- tributions made into the current system, although details of how people who have contracted out of the state second pension and Serps will be treated have yet to be revealed.

Any proposals will be designed so as not to increase public spending dedicated to state pensions.

Hargreaves Lansdown head of pensions research Tom McPhail says: “The simplicity and clarity of a single state pension will encourage private provision and eliminate lingering concerns over the suitability of auto-enrolment.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. It is inevitable that increased longevity means smaller pensions or later retirement. As far as State pensions go, it is probably a bit of both.

    Let us not forget the good news; we are going to live longer.

    John Lawson’s comments, which take the view that living longer should mean retired longer and that having to work longer is a bad thing, remind me of an old joke. A man goes to a doctor and is told he has only 2 weeks to live. “Ok”, says the man, “Can I have the last week in June and the first In July?”

    I am being told that I have an extra 2 or 3 or more years to live and I am quite happy adding the extra longevity to my working life rather than my retirement.

  2. I believe that statistics show that the earlier you retire the longer you live (and I also believe the Government knows this full well). I’m afraid, Keith, that your generation, retiring at 66, will not live as long as the likes of me who retired at 60, and will find that you extra 3 years turn out to be a fantasy.

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