The big news of the day is the long-awaited release of the Pensions Commission’s Pension Reform report.
There has been much speculation surrounding Lord Turner’s 3-year investigation into pensions, in particular about the retirement age being raised – some suggested the report would recommend a rise to 67 – in fact, they have recommended that it rises to 68.
There is naturally plenty of commentary available about the report, but the BBC provides a good, simple explanation with the summary of the headline proposals made by the report. The main proposals are:
- Increase the state pension age for men and women to 66 by 2030, to 67 by 2040, and to 68 by 2050.
- Higher state pension, linked to earnings rather than prices.
- Entitlement to the state pension should be based on residency rather than national insurance contributions.
- People will be automatically enrolled into a low-cost government-administered savings scheme.
The rise in the retirement age is bound to be the most “newsworthy” of the recommendations, as it is this that will cause a fair amount of unhappiness for the vast majority of people. But it has to be mentioned that this particular reform does not necessarily mean we will all have to retire later – just that we may have to wait longer before we start receiving a state pension.
Automatically enrolling people into a government scheme is, in my opinion, a good idea, as it helps to remove one of the biggest hurdles to getting people saving in pensions, which is their complexity. It’s also important that the government can ensure that any system they introduce like this is well run. We’ve seen huge problems with large scale programmes such as the C.S.A. that the government is not always best to run such schemes, but hopefully this would be different.
It’s worth remembering that so far, these are just proposals and are not yet “the law”. But what the report does highlight is the need for us all to be thinking about pensions now, for ourselves, rather than waiting or expecting someone else to do something for us. It seems clear that without a change in attitude to pensions, and without going ahead with reforms, then the situation will only become worse.
The BBC also has a 40-page PDF Executive Summary of the report, which is probably worth a read if you’re really interested in the proposals, and have the time to wade through it.