OECD urges further UK state pension age hike
The Organisation for Economic Co-operation and Development today recommends the UK government further increases the state pension age to combat rising costs.
In October last year, the government announced the SPA would rise to 66 by 2020, accelerating the pace of change advocated by the Labour government, which planned to raise the SPA to 66 by 2026.
However, the OECD said the reforms do not go far enough.
In its Economic Survey of the UK, it argued: “To deal with rising pension costs, a further increase of the effective retirement age should be sought, for example by increasing the SPA further.
“Given the political costs related to discretionary changes in the pension age across OECD countries, an automatic adjustment in line with longevity should also be considered.”
The OECD is not the first entity to call for even more drastic change.
In February, the National Institute of Economic and Social Research said the government could help tackle “lacklustre” projected growth for 2011 by increasing the SPA to 68 by 2020.
The government says raising the retirement age at the current rate will save £5bn a year by 2015.
However, the policy remains controversial. Saga director general Ros Altmann said with the government’s current plan, men’s pension age increases by one year but women’s increases by six years in 2020.
Women in their late fifties will be hit by the sudden jump in their SPA, and Towers Watson has warned many women aged 57 will be unable to save enough money in the meantime to cover the extra years they must wait for state pension.
The government has already abolished the default retirement age, making it far harder for bosses to get rid of staff when they hit 65.
National Association of Pension Funds chief executive Joanne Segars said: “With lifespans getting longer it’s inevitable that we’ll spend more time at work. The balance between work and retirement has to shift to reflect that.
“But we are concerned that government plans to raise the state pension age to 66 will move too quickly to give many women in their late 50s the chance to adapt.
“Our society is not saving anywhere near enough for its retirement and is shoring up some serious problems.”
She added: “Unless people want to rely on one of the worst state pensions in Europe, they are going to have to save more if they want to enjoy a comfortable older age.
“The trade-off for working longer must be a better state pension. It needs to become more generous and a lot simpler. The government must prioritise its reform.”