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Pensions reform proposals to prepare for the future

An independent review into pensions published recently stated that mistakes of the past must be avoided when it comes to any rise of the state pension age. John Cridland, former boss of the Confederation of British Industry, who carried out the review proposed many changes to state pension including proposed age rises in the coming years.

He suggested that those under 45 may have to work a year longer to age 68 while those currently 30 or under may not receive their state pension until they are 70. However, when commenting on his suggestions, he stressed that there should not be a repeat of the last rise in state pension age which has left many women in their 50’s facing a longer wait for retirement.

When it came to the last pension increase, many women affected were not directly told of the rise to their state pension age. As a result, they set up WASPI, Women Against State Pension Inequality, who argue that poor communication meant many were surprised to find out that they had to work for longer than they planned.

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Not only does Mr Cridland suggest that the pension age needs to be raised but he feels that the long term future of the triple-lock needs to be re-considered. The triple-lock applies to state pensions and ensures that they will rise in line with average earnings, prices or 2.5%, whichever is the highest.

The suggestion is that the triple-lock is moved from pensions to earnings to help boost the economy by giving working families a guaranteed pay rise each year. He said that by the 2060’s, almost 1% of GDP will be spent on state pensions as a result of the triple-lock; “It has done a lot of good but it costs £20bn a year and in the long run it may not be affordable.”

He spoke about potential changes to the Winter Fuel Payment which currently pays between £100 and £300 tax-free to help pay heating bills for anyone who has reached state pension age or receives high rate disability benefit. To make this benefit more affordable in future, Mr Cridland suggests making it means-tested rather than universal so only those who really need this, get it.

However, Mr Cridland feels that variable state pension ages are not something he would recommend introducing. This would allow some people to retire earlier but he feels that it will not help change the attitudes of employers regarding employing people in their late 50’s and 60’s.

This review also came with some support for carer’s by suggesting statutory carer’s leave providing those who work but also care for a parent or loved one with more support. By putting in place an elderly care policy in all workplaces, it will make sure employees are looked after and supported removing some of the stress from their situation.

As we live longer and the population continues to grow, many people, including Mr Cridland, feel that we need to plan for the future before the aging society becomes a dominant issue that we are not prepared for.

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