Political conference season drew to a close last week with the Tories the latest party to put forward plans for spending cuts.
Pensions were on the agenda at fringe meetings at all of the three party conferences but the Tories were the only party to tackle pensions as one of their main policies.
Personal accounts could consider themselves on notice if the Conservatives win next year’s general election, with Shadow Work and Pensions Secretary Nigel Waterson saying that changes to the implementation timeframe, announced by the Government last week, cast “a real shadow over the project”.
But it is the Conservatives’ proposal to increase the state pension age from 65 to 66 from 2016 that received the most attention. The proposal received a hostile reception from the trade unions, with Unison general secretary Dave Prentis saying the Tories are using the recession as “a stick to beat ordinary hard-working people”.
Independent pension consultant Dr Ros Altmann was also critical, saying the headline-grabbing proposal is ill thought through, is unfair to women and would widen the gap between public sector and private sector pension provision.
But the reaction from many people in the pension industry is more positive.
Hargreaves Lansdown head of pension research Tom McPhail considers that the proposal from the Conservatives is well judged as there is a growing consensus that action needs to taken on the state pension age.
‘Action is needed now, across the political spectrum, to deal with undersaving and people living to increasing ages in the future’
The Association of British insurers went further, giving whole-hearted endorsement of the proposals.
Director of life and savings Maggie Craig, says: “With people living longer, more active lives, it is right that the pension age should rise. This measure was first proposed in the Turner reforms and enjoyed political consensus, so the Conservatives are to be commended for bringing it forward. Action is needed now, across the political spectrum, to deal with undersaving and people living to increasing ages in the future. Both will put a huge strain on the pension system.”
But regardless of the political differences, the Pensions Policy Institute suggests that we may have to get used to the retirement age being moved upwards as required in response to the seemingly inexorable increase in life expectancy.
PPI director Niki Cleal says: “Given improvements in life expectancy, the state pension age will need to rise in the future to maintain the affordability of the state pension system. When the current state pension was introduced in 1948, a 65-year- old man could expect to draw his state pension to age 77, by 2008, a 65-year-old man could expect to draw it until age 86. This increase in life expect- ancy increases the cost to the exchequer of providing the state pension.
“There may be a case for regular periodic reviews of the state pension age in the light of the latest evidence on life expectancy.”