State pension age should not increase further, PLSA says

Old-Couple-Pension-Pensioners-Elderly-700x450.jpg

The Pensions and Lifetime Savings Association says it does not want to see the state pension age increased any more because it would disadvantage groups of people with lower than average life expectancies.

In its response to the Independent Review of the State Pension Age, being led by former CBI director general John Cridland, the PLSA says the UK is set to have – at 68 – the highest state pension age of any OECD country.

The PLSA says raising it further would be detrimental to people with lower than average life expectancies who might receive little if any state pension, and people with lower than average healthy life expectancies who might struggle to stay in work before the state pension age.

The PLSA also recommends that the state pension triple lock – which guarantees the state pension rises by whichever is highest out of average earnings, the consumer price index, or 2.5 per cent – should be replaced by indexation in line with earnings so that the state pension keeps its current value of around 30 per cent of average earnings.

PLSA external affairs director Graham Vidler says: “A state pension maintained at 30 per cent of average earnings can provide a strong basis for future retirement incomes. Removing the triple lock can keep it affordable without the need to increase state pension age still further to the detriment of people with poorer health.”

Vidler says: “We also believe that proposals for a variable pension age, while attractive in tackling socio-economic differences, would sacrifice the simplicity and clarity of the current system. On balance, we support the current system of a single state pension age for all.”

The PLSA also highlights the impact of changes to the state pension age on some pension schemes, especially those with defined benefit schemes.

It says many of those schemes still retain links to the state pension that would be affected in different ways by any changes to the mechanism for calculating the state pension age.