State retirement age 'should be raised to 70'
Young people need to work until they are 70 if they are to rely on a decent-sized state pension, a British consultancy firm predicted today.
Aon Consulting warned that, with rising life expectancy, it was no longer possible to fund a 35-year retirement through a 35-year working life.
Instead, it said, people would have to choose between extending their working life or accepting a lower pension.
The group said figures from the government actuary in 2002 showed there were 3.88 people of working age to every one person who was over 65.
But as the population ages this ratio is expected to decline to just three people of working age to every one who is retired by 2022, and to less than 2.5 workers for every pensioner by 2031.
It added that, if state benefits were to remain as affordable as they are today, the government would be left with the choice of either letting people continue to retire at 65 but on a lower level of benefits, or raising the state retirement age to 70.
The group estimates that, if the retirement age was increased by five years, the ratio of workers to pensioners in 2031 would be at a similar level to what it is today.
The British government is already encouraging people to retire later by offering lump sum payments of around £30,000 9€45,000) for a single person who does not draw their state pension until they are 70.
Aon said members of a company pension scheme would also benefit by deferring their retirement, with people who are part of a final salary scheme who retired five years later likely to see their pension rise by up to 50%.
Paul McGlone, a senior actuary at Aon Consulting, said: “The main point is if you can work longer then you will earn more and have a higher standard of living in retirement.
“A member deferring retirement from a company final salary scheme by five years will typically see their pension increase by up to 50% as a result.
“For anyone who can finance their day-to-day expenses through continuing employment between 65 and 70, perhaps through part-time work, this option may be the best way of securing a better standard of living in retirement.”
