The Chancellor’s Autumn Statement announced further increases to the state pension age. The state pension was originally designed with the expectation that it would be paid out for five years.
With all of us living longer, the state pension is no longer affordable on its current terms. For those of us in the industry, the rise in the state pension age was confirmation of the inevitable, but was it expected by the public?
The Pensions Advisory Service takes more than 80,000 calls and online enquiries each year, and 15% of them are people looking at retirement. We do get asked about the state pension and many people are still talking about the retirement ages of 60 and 65, which suggests there is a mismatch between their expectations and reality.
When they reach the old state pension age, they may discover that they do not have sufficient pension or savings to retire.
This is a big issue for employers. With the age discrimination rules, employers could find they have an ageing workforce, with people working because they have to, rather than want to. What will this do to productivity? What will it do to morale? How hard will it be for employers to manage this situation?
Employers need to think about how to avoid this situation. Providing information and guidance to employees is essential, and this does not have to be expensive.
The Pensions Advisory Service provides free information and guidance to the public, and employees are the public. This has the dual benefit of raising employees’ awareness of the deferred remuneration they are receiving by way of pension contributions. It also gives employees reasonable expectations on what they need to do if they want to retire at the old state pension ages.
Michelle Cracknell is chief executive of the Pensions Advisory Service