The state pension system will become financially “unsustainable” unless the Government sets a higher pension age and introduces a link to earnings or longevity, a research paper warns.
The paper, produced by the Oxford Institute of Ageing and longevity consultant Club Vita, says introducing a variable state pension age would acknowledge the wide variations in life expectancy across the UK. The research also casts doubt on the affordability of a flat-rate state benefit, suggesting additional reforms will be needed to ensure the system remains sustainable.
Club Vita longevity consultant and report co-author Steven Baxter says: “The Government’s reform proposals are welcome, but without additional measures we risk the system becoming unviable.
“We should also consider such measures as splitting the proposed flat-rate universal pension into two distinct elements. These would comprise a basic ‘universal’ support amount and a modest ‘reward’ level that provides a top-up in return for recognised economic activity.”
Last month, Money Marketing revealed the state pension green paper had been delayed as Government officials struggle to resolve how to treat people who have accumulated contracted-out benefits in Serps and the state second pension. There are also concerns about the impact higher national insurance contributions will have on public sector workers.