COMMENT
Retire at 68

By Alison Hunt (TMFAlly)
November 30, 2005

You can't have failed to hear at least something in the news regarding Lord Turner's report. As head of the Pensions Commission he has spent the last three years analysing our pension system and that of many other countries (including Sweden, New Zealand and the US amongst others) to find a workable solution to the pensions crisis. His second report has now been released. But what did it say? And what does it mean for you? Here, in summary are some of the major points:

1. Increase in State retirement age.

The state retirement age for men and women should rise in line with our increasing life expectancy. Retirement age should rise to 66 by 2030, 67 by 2040 and to 68 by 2050.

2. More generous State Pension

Increases should be linked from 2010 to average wages, not prices.

3. Reduced means testing

As many pensioners currently fail to claim pension credit as the means testing involved is regarded as degrading, the Turner report recommends that the State system should become as non-means tested as possible.

4. Universal State Pension (Citizens' pension)

Entitlement to the State pension should be based on residency, rather than National Insurance contributions. It is hoped that this would help ease the plight of women pensioners and carers, many of who would have to live in poverty otherwise.

5. Compulsory Saving

A new National Pension Saving Scheme (SPSS) would be set up. All workers who do not already belong to a pension scheme would be automatically enrolled in the scheme, which should be in place by 2010 (although workers will be given a one month window to opt out with biannual reviews). All employee members would have to make compulsory contributions of four per cent of earnings. Employers must contribute a further three per cent and the Government must give tax relief of one per cent. Annual charges must be no more than 0.3 per cent.

6. State Second Pension (S2P)

The State second pension should remain but evolve into a flat rate payment. The option to "contract-out" should be abolished.

7. Over 75s

Finally, in a bid to tackle the current inequality of pension income, a universal basic State pension should be introduced for the over 75s.

Some of these recommendations do seem to be quite major, but most of us are aware that the only way it would be possible to sort out the current and impending crisis is with radical change. Popular recommendations are bound to include the reduction in means testing. Age Concern believes that around a third of pensioners eligible for the payment do not receive it, due to the fact you need to be subjected to the indignity of means testing to claim it.

The report also seems to have tried to tackle one of the biggest issues - women's pensions, so famously labelled as "a scandal" by David Blunkett. Introducing a residency-based State pension would mean that many women who have taken time out of their careers to care for children and elderly relatives would not find themselves effectively punished when it's their turn to retire.

And one of the most interesting recommendations is for compulsory saving. After all, there can't be many who don't realise that whatever the changes made to the State system, there simply won't be enough money in the coffers to provide us all with a luxurious State pension. We all need to save for our own retirements and the more financial encouragement we can get, the better. And if we want to retire before the recommended age and on a decent income, we need to saving and investing as much as we can, now.

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