Britain must raise the retirement age in line with rising life expectancyby John Godfrey / September 17, 2014 / Leave a comment
Funding old age matters hugely. The UK population has not saved enough for retirement, which now may well include expensive care requirements. Statistics from the Department for Work and Pensions show that 11.9m people are saving too little, and that half of those are less than 80 per cent of the way to their target for retirement income.
Steve Webb, Britain’s most able Pensions Minister in decades, has done well to raise the basic state pension with triple-locked increases, and better still to introduce auto-enrolment in workplace schemes. More than 90 per cent of auto-enrolled savers have stayed in their schemes, beating all expectations.
We need to build on auto-enrolment, learning from the well-established Australian Superannuation scheme, the retirement scheme which has worked so well in that country. UK auto-enrolment contributions are set to rise to 8 per cent in 2017, but we should go further. Australia is already at 9.5 per cent and rising. We need to aim higher, and get there faster. Going to 12 per cent would ensure that another 600,000 people have adequate savings.
Pension tax relief at the marginal rate is a system designed by the rich, for the rich: £25bn out of the total £35bn of pension tax relief goes to higher rate taxpayers. It needs to be less regressive if it is to work as an incentive for the lower paid: a flat rate of 25 per cent would work better and enable government to deploy the money it spends on pensions more effectively.
George Osborne’s budget changes—classic “creative destruction”—will radically change how people use their pension savings t…