pensions policy institute believes saving more over a longer period is only solution to crisis
Upping the State pension age to 70 would close the pensions savings gap and allow State pension benefits to be raised, according to a report from the Pensions Policy Institute (PPI).
Alison O'Connell, author of the paper and director of the PPI, said the UK cannot afford to avoid a debate on raising the State pension age.
O'Connell said: 'There are only two ways out of the pensions crisis: saving more or working and saving longer. Working longer is the more attractive solution for many people, and it fits in with the fact that we are all living longer.'
Compelling reasons for a debate on the State pension age include the fact that 90% of people now live to collect their pension, compared to 66% back in the 1950s, when the current pension system was set up.
In addition, O'Connell said that people are living longer and consequently claiming a pension for around eight years longer than in 1950, putting an increasing burden onto the State. If pensionable age were raised to 70 then, the report claims, the level of the basic State pension could be raised, at no extra cost and would free up resources to increase it by nearly 50% by 2030.
Another option would be to raise the Basic State pension by more as people get older, by up to 70% at 75 and over at no extra cost.
'Raising the Basic State pension at older ages clarifies its role as a guaranteed insurance against poverty caused by living longer than expected. This role is increasingly relevant as longevity continues to improve,' O'Connell said. Further increases to State pension age, she added, could take older pensioners off means tested benefits, for a small temporary extra cost. State pension resources would then be focused on giving a meaningful Basic State pension to older pensioners, instead of a small amount to all.
Even if the pensionable age was increased, however, for implementation around 2025, further increases are likely later, the report states.
Longevity is projected to continue to improve and so the State pension age may well have to also be increased in the future to keep pace.
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