The Institute of Directors (IOD) has proposed a radical overhaul of the pension system, including a plan to increase the state retirement age to 70.
In its report Roadmap for Retirement Reform 2009, the IOD says both the state and private system is in need of radical reform because it is overcomplicated and fails to take into account the ageing population. Consequently, the policy paper argues, pensioners and businesses have become disengaged from saving for retirement.
"The UK's pension system, both state and private, is at present severely ill-equipped
to deal with the longevity challenge and suffers from major problems," says the IOD.
As part of a raft of measures to transform the system, the industry body says the state retirement age should be raised "swiftly" to 70 to take into account increases in life expectancy and better healthcare.
Furthermore, it calls for the abolition of means-tested state retirement benefits with
the resulting savings being used to fund the provision of a "decent" universal pension
at or above the current level.
The IOD says the private sector was also in need of urgent simplification, with
defined pension benefits in "terminal decline" and the defined contribution scheme
"inappropriate for 21st century lives" and unattractive to consumers.
However, TUC general secretary Brendan Barber says the proposal to increase the state retirement age to 70 smacks of injustice and would mean hardship for many older people.
"The better off you are, the longer you live and the more years you get to claim a state
pension," he says.
"A big rise in the state pension age would mean the less well-off lose a much bigger proportion of their pension than longer-living affluent pensioners, who are much less dependent on the state pension in any case.
"With employers fighting hard to keep a retirement age of 65, such a proposal would
condemn many older people to a limbo where they are too old to work and too young
for a state pension."
The IOD report comes on the back of a plan by the Conservative party to bring forward the increase in the state pension age to 66 by 2016.
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